US Treasury Warns Against Excessive Yen Volatility

The US Treasury Department has expressed concerns over excessive volatility in the Japanese yen, urging the Bank of Japan to continue raising interest rates. The department's semi-annual currency report notes that despite narrowing US-Japan interest rate differentials, the yen's weakness persists.

According to the report, the yen fell by 51 percent between end-2011 and end-April 2026 in both real effective terms and against the dollar, resulting in substantial undervaluation. The report also states that while global factors such as financial market volatility and oil prices have affected the yen, excess volatility is undesirable.

The US Treasury has called for further interest rate hikes by the Bank of Japan to help anchor inflation expectations and reduce excessive exchange rate volatility. This move comes as the yen hit a 40-year low against the dollar on Thursday, prompting concerns from investors about possible currency intervention by Japanese authorities.