By Leika Kihara
WASHINGTON (Reuters) -Japanese Finance Minister Katsunobu Kato said on Thursday he agreed with U.S. Treasury Secretary Scott Bessent to continue “constructive” dialogue on currency policy, but did not discuss setting currency targets or a framework to control yen moves.
Kato said he explained to Bessent “Japan’s economic developments including recent wage increases” in their first face-to-face meeting held in Washington earlier on Thursday.
The two sides also re-confirmed a long-held agreement among G7 advanced nations that exchange rates should be set by markets, and that excessive volatility in currency moves would hurt economic stability.
But they did not discuss whether recent moves in the yen were excessive, Kato said.
“There was absolutely no discussion on a target for exchange-rate levels or a framework to manage currency moves,” Kato told a news conference, when asked whether he received criticism from Bessent over the weak yen, or accusation Tokyo was manipulating the currency to give exports a trade advantage.
The U.S. Treasury Department by late Thursday had not issued any statement on the bilateral meeting, held on the sidelines of the International Monetary Fund and World Bank Group meetings in Washington.
As the two countries proceed with separate bilateral talks on tariffs, the thorny currency rate topic has been set aside for the two finance chiefs to discuss. As a result, the meeting was closely watched by markets as a venue where Washington could pressure Tokyo to prop up the yen and help it reduce the huge U.S. trade deficit.
U.S. President Donald Trump’s focus on addressing the trade deficit, and his past remarks criticizing Japan for intentionally maintaining a weak yen, have led to market expectations that Tokyo will face pressure to strengthen the yen’s value against the dollar and give U.S. manufacturers a competitive advantage.
Such expectations have pushed up the yen against the dollar by about 9% since Trump’s return to office in January.
WARY OF FURTHER YEN GAINS
A senior Japanese finance ministry official told reporters on Thursday that no specific date has been set for the next meeting between Kato and Bessent.
Kato declined to comment, when asked how Japan would follow up on Thursday’s meeting with Bessent, and how the outcome could affect broader trade negotiations with the U.S.
Sources have told Reuters that Japanese policymakers see little scope for direct action such as currency intervention or an immediate interest rate hike by the central bank.
Japan’s latest foray into the exchange-rate market was in 2024, when it bought yen to prop up the currency from a nearly three-decade low of 161.99 to the dollar hit in early July.
With broad-based dollar declines already having pushed up the yen to around 142 per dollar, Japanese officials are wary of taking steps to further strengthen the currency for fear of narrowing exporters’ margins at a time of tariff strains.
The hurdle is even higher to use Japan’s monetary policy as a means to prop up the yen. The Bank of Japan is in no mood to rush into hiking rates at a time Trump’s tariffs threaten to derail Japan’s fragile economic recovery.
Speaking in Washington after attending a Group of 20 finance ministers gathering on the sidelines of the IMF meetings, BOJ Governor Kazuo Ueda said on Thursday the central bank will focus on durably achieving its 2% inflation target in making monetary policy decisions.
The meeting between Kato and Bessent on Thursday afternoon would be followed by a scheduled visit to Washington by Japan’s top trade negotiator Ryosei Akazawa next week for a second round of bilateral trade talks.
(Reporting by Leika Kihara; Editing by Dan Burns and Andrea Ricci)
