Tokyo, May 16, 2025 — Japanese Finance Minister Katsunobu Kato announced on Friday that he plans to discuss foreign exchange issues with U.S. Treasury Secretary Janet Yellen on the sidelines of the upcoming G7 finance meeting in Canada. Both Japan and the United States agree that “excessive fluctuations” in the yen–dollar rate can harm economic and financial stability, Kato told parliament.
“We reiterated at our April 24 meeting that exchange rates should be determined by the market and that excessive fluctuations would have an adverse impact on economic and financial stability,” Kato said.
“We also agreed to continue close and constructive dialogue. … Based on this consensus, we hope to continue discussions.”
Trade Talks to Exclude Exchange Rates
Under pressure from U.S. demands to reduce its trade deficit, Japan has faced market expectations that it may engineer a stronger yen. However, both governments agreed to leave exchange-rate issues out of formal trade negotiations, handling them instead through direct talks between their finance ministers.
Kato indicated that if his meeting with Secretary Yellen goes well, discussions about currency can be woven into broader tariff negotiations.
U.S. Treasury Holdings and Possible Portfolio Shifts
When questioned about Japan’s holdings of U.S. Treasury securities, Kato emphasized that Japan maintains these assets to achieve “optimal asset management” while ensuring “sufficient liquidity.” He did not signal any imminent shift away from Treasuries.
Yet Bloomberg has reported that the opposition Democratic Party for the People has floated an idea: Japan could reinvest maturing U.S. Treasuries into ultra-long U.S. bonds in exchange for U.S. tariff concessions.
G7 Finance Meeting in Canada
Finance ministers and central bank governors from the Group of Seven nations will meet in Niagara Falls, Canada, from May 20 to 22. Kato intends to meet Secretary Yellen there, continuing the “close and constructive dialogue” on currency and financial issues that both sides deem critical.
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