Japan Seeks Dialogue With U.S. Over Yen Volatility Ahead of G7 Summit

Japanese Finance Minister Katsunobu Kato signaled his intent to hold talks with U.S. Treasury Secretary Scott Bessent to address growing concerns over foreign exchange volatility, stressing that excessive currency swings can threaten economic and financial stability.

Speaking before parliament on Friday, Kato reaffirmed the shared stance from their April 24 meeting that exchange rates should be market-determined and stable. “We agreed that excessive volatility has adverse impacts and pledged to continue close, constructive dialogue,” he said.

With the yen recently under pressure and U.S. President Donald Trump’s renewed focus on narrowing the trade deficit, market watchers have speculated that Tokyo could face pressure from Washington to allow the yen to appreciate. Kato is expected to meet Bessent during the upcoming G7 finance ministers and central bank governors’ summit in Canada from May 20-22.

While currency policy remains excluded from direct trade talks between the two countries, Kato suggested that exchange rate discussions may arise naturally within broader economic negotiations, including those related to tariffs.

When asked about the possibility of Japan shifting its U.S. Treasury holdings, Kato emphasized that such assets are managed to ensure liquidity and optimal returns. Meanwhile, Bloomberg reported that the opposition Democratic Party for the People proposed reinvesting proceeds from maturing U.S. Treasuries into super-long U.S. bonds in exchange for tariff relief—a potential strategy to ease bilateral tensions.

Japan’s continued emphasis on currency stability and its diplomatic approach to U.S. trade policy highlight its efforts to balance market expectations, foreign pressure, and domestic economic interests amid global financial uncertainty.