U.S. Treasury Calls for More BoJ Tightening Amid Weak Yen

2026-07-23 23:30 By Farida Husna 1 min. read

The U.S.

Treasury Department said the Japanese yen has remained weak despite a narrowing in U.S.-Japan interest rate differentials, adding that excessive currency volatility is undesirable.

In its semi-annual currency report released Thursday, the Treasury urged the Bank of Japan to continue raising interest rates, arguing that higher borrowing costs would help contain inflation and stabilize the exchange rate.

"Monetary policy normalisation would help anchor inflation expectations and reduce excessive exchange rate volatility," the report said.

The Treasury noted that while nominal wages have risen significantly, inflation continues to erode households' purchasing power, underscoring the need for further policy normalization.

The comments came as the yen fell to a fresh 40-year low against the U.S.

dollar Thursday, heightening market expectations that Japanese authorities could intervene in the foreign exchange market after repeatedly warning they would act against excessive moves.



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U.S. Treasury Calls for More BoJ Tightening Amid Weak Yen
The U.S. Treasury Department said the Japanese yen has remained weak despite a narrowing in U.S.-Japan interest rate differentials, adding that excessive currency volatility is undesirable. In its semi-annual currency report released Thursday, the Treasury urged the Bank of Japan to continue raising interest rates, arguing that higher borrowing costs would help contain inflation and stabilize the exchange rate. "Monetary policy normalisation would help anchor inflation expectations and reduce excessive exchange rate volatility," the report said. The Treasury noted that while nominal wages have risen significantly, inflation continues to erode households' purchasing power, underscoring the need for further policy normalization. The comments came as the yen fell to a fresh 40-year low against the U.S. dollar Thursday, heightening market expectations that Japanese authorities could intervene in the foreign exchange market after repeatedly warning they would act against excessive moves.
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