Japanese and US officials successively made comments mindful of correcting the yen’s decline, highlighting the view that the background to calls for a correction involves not only domestic factors in Japan but also US interest-rate trends and debt issues. Attention is now focused on whether the correction of the yen’s decline will continue or whether the dollar will weaken and the yen strengthen further.
Japanese and US officials successively made comments focused on correcting the yen’s decline. Finance Minister Katayama conveyed remarks made in response to concerns over the yen’s weakness following the Japan-US summit, while Prime Minister Takaichi was reported to have said that the yen’s undervaluation is a problem in general terms. US Treasury Secretary Bessent disclosed that he had discussed with Japanese finance officials the desirability of a yen reflecting strong fundamentals.
Three factors are cited behind the correction of the yen’s decline. The first is domestic factors in Japan, the second is avoiding a situation in which rising long-term interest rates in Japan trigger higher US interest rates, and the third is a US economic factor: supporting US corporate activity through a weaker dollar against the backdrop of US debt issues. The third factor is particularly a US-side motive and will be a key issue shaping future developments.
The author points out that the movement to correct the yen’s decline will be heavily influenced by US debt issues and fiscal strategy. If the US pursues fiscal consolidation, the dollar could weaken while the yen moves toward appreciation. On the other hand, if it favors reducing the real burden of debt as an inflation measure, there may be circumstances in which a stronger dollar is desirable. Ultimately, the focus is on how the US government resolves its debt issues, which will determine the direction of the dollar-yen exchange rate and long-term interest rates going forward.
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