US Treasury Urges BOJ to Raise Rates Again Amid Yen's Record Low
The US Treasury Department has issued a report stating that Japan's yen is significantly undervalued and urging the Bank of Japan to further raise interest rates to stabilize the currency.
The report, released on Thursday, points out that despite nominal wage increases, inflation has put pressure on household purchasing power in Japan. The Treasury Department believes that monetary policy normalization will help anchor inflation expectations and reduce excessive exchange rate volatility.
The yen/dollar exchange rate is currently hovering near a forty-year low, with the currency having depreciated by about 51% from the end of 2011 to the end of April 2026. The report notes that even with the narrowing US-Japan interest rate spread, the yen continues to weaken.
The Treasury Department has signaled its support for the Bank of Japan to continue raising rates, which would further advance monetary policy normalization. This stance is seen as tacit approval for potential intervention by Japanese authorities, while also leaving room for coordination between both sides on exchange rate issues.