By Leika Kihara and Makiko Yamazaki
TOKYO (Reuters) -When Japanese Finance Minister Katsunobu Kato meets his U.S. counterpart Scott Bessent in Washington this week, the yen is shaping up to be a major topic of discussion, though sources say Tokyo will push back against any request to boost its currency.
While some analysts bet Washington will pressure Tokyo to help prop up the yen, Japan sees little scope for direct action such as currency intervention or an immediate interest rate hike by the central bank, according to three sources with knowledge of the negotiations.
Rather, Japanese policymakers hope to better understand what the U.S. has in mind on exchange-rate matters, and how they fit into a package of steps the two countries will negotiate in clinching a trade deal, the sources said.
That means the meeting between Kato and Bessent, which will be the first face-to-face talks between the two, will likely underwhelm expectations of some market players for a major, coordinated arrangement to boost the yen.
“Much will be about sounding out Washington’s intentions,” one of the sources said on Japan’s strategy on the expected meeting between Kato and Bessent, which will take place on the sidelines of the spring meeting of the International Monetary Fund in Washington.
The two countries are still arranging a date for the meeting, Kato told reporters on Tuesday. Japanese policymakers say they have yet to receive any specific requests from the U.S. on currency policy.
The last major occasion when the U.S. pressured Japan into strengthening the yen was in 1985, when Washington led the G7 in a coordinated depreciation of the dollar under the Plaza Accord.
LACKING FEASIBLE TOOLS
U.S. President Donald Trump’s focus on addressing a huge trade deficit, and his past remarks criticising Japan for intentionally maintaining a weak yen, have led to market expectations that Tokyo will face pressure to strengthen the yen’s value against the dollar and give U.S. manufacturers a competitive advantage.
These expectations have fuelled the yen’s recent rise to seven-month highs against the dollar.
Bessent has also said he was looking forward to discussions with Japan on tariff, non-tariff barriers and exchange rates.
Sources have previously told Reuters the slow pace at which the Bank of Japan is raising borrowing costs from ultra-low levels could also come under fire in bilateral trade talks.
But there is little Japan can do to influence exchange rates in ways beneficial for both countries. Japan’s latest foray into the exchange-rate market was in 2024, when it bought yen to prop up the currency from a nearly three-decade low of 161.99 to the dollar hit in early July.
