With the Japanese yen continuing to struggle, a top official from the ruling Liberal Democratic Party has called for measures to strengthen the currency—not by selling off U.S. Treasury bonds, but by enhancing Japan’s industrial edge.
Yen Weakness Hits Households
Itsunori Onodera, head of the party’s Policy Research Council, addressed the issue during a Sunday appearance on NHK. He directly linked the weak yen to rising consumer prices, stating, “The weak yen has been among factors pushing up prices. To strengthen the yen, it’s important to strengthen Japanese companies.”
The comment underscores growing domestic concern that a prolonged depreciation of the yen is doing more harm than good. While a weaker currency traditionally benefits exporters, its impact on households has sparked political and economic unease.
Rejecting Treasury Threats Ahead of U.S. Talks
Ahead of a new round of trade talks with the United States, Onodera also pushed back against calls to leverage Japan’s massive U.S. Treasury holdings—second only to the U.S.—as a negotiating tool.
“As a U.S. ally, the government shouldn’t think about intentionally using U.S. Treasury holdings,” he said, responding to an opposition lawmaker’s suggestion to do just that in response to tariffs imposed by President Donald Trump.
Trade talks are set to include contentious topics like currency policy, and insiders expect U.S. officials may pressure Tokyo to intervene in favor of the yen. Treasury Secretary Scott Bessent is expected to meet with Japan’s top negotiator Ryosei Akazawa later this week.
Interest Rates, Policy Divergence in Focus
The gap between monetary policies in Japan and the U.S. has widened in recent years. While the Federal Reserve aggressively raised interest rates, the Bank of Japan has kept its own rates near zero. This divergence has been a key factor behind the yen’s slide to levels not seen in nearly 30 years.
Although Tokyo has intervened in the currency market multiple times—most notably in 2022 and again last year—recent dollar weakness has led to a rebound in the yen. On Friday, the dollar dipped to 142.895 yen, its lowest since September.
Still, the broader volatility persists. Since Trump’s latest tariff announcements targeting automakers, financial markets have experienced their most erratic period since the height of the COVID-19 pandemic.
Historic Treasury Sell-Off Shakes Markets
Adding fuel to the fire, U.S. Treasuries—long considered the safest asset class—have faced massive selling pressure. One particularly intense sell-off began in Asia, leading to speculation that China was among the major sellers.
The pressure on U.S. debt markets was significant enough to prompt Trump to hit pause on his “reciprocal” tariff plan, announcing a 90-day delay. Treasury Secretary Bessent is believed to have played a crucial role in that decision.
Meanwhile, U.S. stocks ended the week on a high note, with the Dow up over 1.5%, the S&P 500 rising 1.8%, and the Nasdaq climbing 2%. But for Japan, the real challenge may be balancing a competitive currency with economic stability at home.