Amid rising economic pressures and increasing living costs, a senior official from Japan’s ruling party called for strengthening the yen, arguing that supporting the currency should be done by enhancing the competitiveness of the national industry. He pointed out that the weakening of the yen was one of the main reasons behind rising prices, which poses a significant challenge to Japanese households facing mounting pressure due to the higher cost of living.
Ahead of trade talks with the United States, the official emphasized that Japan should not use its massive holdings of U.S. Treasury bonds — the largest outside of the U.S. — as leverage in negotiations, despite the recent tariffs imposed by Washington.
He also added that the interest rate gap between Japan and the U.S., where Japan continues with low-interest policies while the U.S. raises interest rates, has significantly contributed to the yen’s decline. This increases pressure on the Japanese economy, especially with the diminishing purchasing power of households.
The trade talks are expected to address sensitive issues, with the yen exchange rate being a key topic. Reports suggest that Washington may demand Tokyo take steps to stop the currency’s decline. The Bank of Japan’s monetary policies, especially its delay in raising interest rates, are also likely to be discussed. Any move toward selling U.S. Treasury bonds could destabilize global financial markets, further complicating the economic situation.
Since U.S. Treasury bonds are considered one of the major safe-haven assets in global markets, Japan’s sale of its large holdings of these bonds could cause sharp fluctuations in financial markets. Such a move could significantly raise interest rates on U.S. Treasury bonds and increase tensions between major powers, including Japan and the U.S., potentially affecting global economic stability.
It is worth noting that Japan holds more than a trillion dollars in U.S. Treasury bonds, followed by China, making its financial position highly influential in global debt markets.
