Japan, US finance chiefs hold talks amid yen's stubborn weakness

Japanese Finance Minister Satsuki Katayama met with U.S. Treasury Secretary Scott Bessent on Monday to discuss Japan's persistent yen weakness, according to an official familiar with the matter. The two discussed the situation during a two-day Group of 20 finance meeting held in Asheville, North Carolina. This was a month after Japan and the United States held a rare joint currency market intervention to boost the value of the yen, which had plummeted to a 40-year low near 164 against the dollar after the July 31 intervention.

Bessent, co-chairing the G20 meeting with Federal Reserve chief Kevin Warsh, has expressed confidence that Japan will take further steps to strengthen the yen, despite the market already pricing in a potential rate hike by the Japanese central bank. Despite the intervention, the yen has slipped past the psychologically important 160 mark to the dollar.

Bessent has warned that extreme yen volatility could lead to higher U.S. interest rates, which would make borrowing more expensive for Americans and could influence the outcome of November's midterm congressional elections. The widening interest rate gap between Japan and the U.S. continues to influence the yen's weakness, and a persistently weak currency poses challenges for both countries.

While the yen's decline has bolstered Japan's export competitiveness, it has also raised import costs, dampening domestic consumption. Japan's government, mindful of its public debt, lowered the consumption tax rate on food and beverages to 1 percent for two years in early August.