Japan and the US confirmed close cooperation on exchange rates; the market is closely watching whether Bessenter will urge the Bank of Japan to raise interest rates.
2026-05-12 13:17:40
On Tuesday (May 12), Japanese Finance Minister Satsuki Katayama told reporters in Tokyo after meeting with U.S. Treasury Secretary Scott Bessenter that Japan and the United States reaffirmed their close cooperation in handling exchange rate fluctuations, including foreign exchange intervention. The two sides discussed market dynamics and confirmed that Japan is responding to exchange rate fluctuations in accordance with the joint statement signed with the U.S. last September, which allows for foreign exchange intervention to address excessive market volatility. Japan has recently been suspected of spending nearly 10 trillion yen (approximately $63.5 billion) to buy yen to support its currency, and the market is watching whether Bessenter's remarks will provide additional support for the yen.
I. Meeting Outcomes: Reaffirmation of Close Coordination <br />Japanese Finance Minister Katayama told reporters in Tokyo on Tuesday, after meeting with U.S. Treasury Secretary Scott Bessant, that Japan and the United States reaffirmed their commitment to close cooperation in dealing with exchange rate fluctuations, including foreign exchange intervention.
Katayama stated that the two sides discussed market dynamics and confirmed that Japan is responding to exchange rate fluctuations in accordance with the joint statement signed with the United States last September, which allows for intervention in foreign exchange to address excessive market volatility.
II. Core Statement: "Coordination is extremely good"
Katayama stated at a press conference, "We both agree that the coordination between the two sides regarding recent market volatility, including exchange rates, has been extremely good."
When asked whether Bessenter had commented on Japan's recent apparent intervention to support the yen, Katayama said, "Given the current situation, we reaffirm the need to continue close coordination regarding market volatility."
III. On the meaning of "close coordination" <br/>When asked whether "close coordination" meant that the U.S. could proactively respond to the sharp depreciation of the yen, Katayama said, "We discussed deepening coordination in various fields."
When asked whether the Bank of Japan's monetary policy was discussed during the meeting, Katayama declined to comment.
IV. Background: Japan Suspected of Large-Scale Intervention in the Foreign Exchange Market <br />Japan has recently been suspected of spending nearly 10 trillion yen (approximately US$63.5 billion) to buy yen in order to support its weak currency. The depreciation of the yen has negatively impacted the Japanese economy by pushing up import costs.
Japanese policymakers are hoping that Bessant's approval of their currency market intervention will provide additional effectiveness to the measures and help slow the yen's decline.
V. Market Focus: Bessant May Call for Faster Interest Rate Hikes <br/>Some analysts also speculate that Bessant may again call on the Bank of Japan to accelerate the pace of interest rate hikes as a way to support the yen.
Summary of opinions from last month's meeting showed that, influenced by the increased price pressure from soaring oil prices caused by the war, some Bank of Japan policymakers advocated at the April meeting that an interest rate hike might be necessary as soon as possible, with one member mentioning the possibility of action in June.
VI. Follow-up Itinerary <br/>Bessenter's three-day visit to Tokyo will continue until Wednesday, and he is expected to meet with Japanese Prime Minister Sanae Takaichi.
During their meeting in Tokyo, Japan and the United States confirmed that they will maintain close coordination on exchange rate fluctuations, including foreign exchange intervention. Japan has recently been suspected of intervening in the foreign exchange market with approximately $63.5 billion to support the yen, and policymakers are hoping that Bessenter's remarks will provide additional effectiveness for this intervention. The market is also watching whether Bessenter will again call on the Bank of Japan to accelerate the pace of interest rate hikes. The degree of coordination between Japan and the United States on exchange rate policy, as well as the Bank of Japan's monetary policy path, will continue to be key variables influencing the yen's exchange rate.
Analysts generally believe that persistent imported inflation is the fundamental reason forcing the Bank of Japan to change course. Affected by high energy prices due to the Middle East conflict, the Bank of Japan significantly raised its inflation forecast in April.
S&P Global points out that Japan's inflation dynamics are normalizing, with core inflation consistently above 2%, and businesses and workers finding it easier to raise prices and wages, providing a basis for interest rate hikes.
Regarding the end of interest rate hikes, institutions generally believe that interest rates will return to a "neutral" level.
S&P Global forecasts that, assuming inflation remains stable at 2%, the Bank of Japan's policy rate will gradually rise to around 1.5% over the next few years (by 2028), which aligns with the Bank of Japan's estimated neutral interest rate range of 1.1%-2.5%. This implies significant room for further increases from the current 0.75%.
At 13:17 Beijing time on May 12, the USD/JPY exchange rate was 157.64/65.
Detailed information
I. Meeting Outcomes: Reaffirmation of Close Coordination <br />Japanese Finance Minister Katayama told reporters in Tokyo on Tuesday, after meeting with U.S. Treasury Secretary Scott Bessant, that Japan and the United States reaffirmed their commitment to close cooperation in dealing with exchange rate fluctuations, including foreign exchange intervention.
Katayama stated that the two sides discussed market dynamics and confirmed that Japan is responding to exchange rate fluctuations in accordance with the joint statement signed with the United States last September, which allows for intervention in foreign exchange to address excessive market volatility.
II. Core Statement: "Coordination is extremely good"
Katayama stated at a press conference, "We both agree that the coordination between the two sides regarding recent market volatility, including exchange rates, has been extremely good."
When asked whether Bessenter had commented on Japan's recent apparent intervention to support the yen, Katayama said, "Given the current situation, we reaffirm the need to continue close coordination regarding market volatility."
III. On the meaning of "close coordination" <br/>When asked whether "close coordination" meant that the U.S. could proactively respond to the sharp depreciation of the yen, Katayama said, "We discussed deepening coordination in various fields."
When asked whether the Bank of Japan's monetary policy was discussed during the meeting, Katayama declined to comment.
IV. Background: Japan Suspected of Large-Scale Intervention in the Foreign Exchange Market <br />Japan has recently been suspected of spending nearly 10 trillion yen (approximately US$63.5 billion) to buy yen in order to support its weak currency. The depreciation of the yen has negatively impacted the Japanese economy by pushing up import costs.
Japanese policymakers are hoping that Bessant's approval of their currency market intervention will provide additional effectiveness to the measures and help slow the yen's decline.
V. Market Focus: Bessant May Call for Faster Interest Rate Hikes <br/>Some analysts also speculate that Bessant may again call on the Bank of Japan to accelerate the pace of interest rate hikes as a way to support the yen.
Summary of opinions from last month's meeting showed that, influenced by the increased price pressure from soaring oil prices caused by the war, some Bank of Japan policymakers advocated at the April meeting that an interest rate hike might be necessary as soon as possible, with one member mentioning the possibility of action in June.
VI. Follow-up Itinerary <br/>Bessenter's three-day visit to Tokyo will continue until Wednesday, and he is expected to meet with Japanese Prime Minister Sanae Takaichi.
During their meeting in Tokyo, Japan and the United States confirmed that they will maintain close coordination on exchange rate fluctuations, including foreign exchange intervention. Japan has recently been suspected of intervening in the foreign exchange market with approximately $63.5 billion to support the yen, and policymakers are hoping that Bessenter's remarks will provide additional effectiveness for this intervention. The market is also watching whether Bessenter will again call on the Bank of Japan to accelerate the pace of interest rate hikes. The degree of coordination between Japan and the United States on exchange rate policy, as well as the Bank of Japan's monetary policy path, will continue to be key variables influencing the yen's exchange rate.
Bank of Japan's Interest Rate Hike Path as Seen by Institutions
Analysts generally believe that persistent imported inflation is the fundamental reason forcing the Bank of Japan to change course. Affected by high energy prices due to the Middle East conflict, the Bank of Japan significantly raised its inflation forecast in April.
S&P Global points out that Japan's inflation dynamics are normalizing, with core inflation consistently above 2%, and businesses and workers finding it easier to raise prices and wages, providing a basis for interest rate hikes.
Regarding the end of interest rate hikes, institutions generally believe that interest rates will return to a "neutral" level.
S&P Global forecasts that, assuming inflation remains stable at 2%, the Bank of Japan's policy rate will gradually rise to around 1.5% over the next few years (by 2028), which aligns with the Bank of Japan's estimated neutral interest rate range of 1.1%-2.5%. This implies significant room for further increases from the current 0.75%.
At 13:17 Beijing time on May 12, the USD/JPY exchange rate was 157.64/65.
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