Yen strengthens as bond yields hit highest since 1996
Japan’s Finance Minister Satsuki Katayama on Friday defended ministry budget requests totaling about 143 trillion yen ($917.85 billion), rejecting characterizations of the figure as a significant increase and pushing back against speculation that U.S. Treasury Secretary Scott Bessent was pressuring Tokyo to raise interest rates.
The 143 trillion yen total aligns with Prime Minister Sanae Takaichi’s push to reduce dependence on supplementary budgets, Katayama said at a news conference. Combined, the fiscal 2025 supplementary budget and this year’s regular spending came to about ¥141 trillion, meaning the ministries’ requests represent an increase of about ¥2.5 trillion. “I don’t believe it is accurate to describe this as a significant increase,” Katayama said.
The budget discussion is unfolding amid continued concerns about Japan’s fiscal sustainability, which have pushed government bond yields higher and weighed on the yen. The 10-year Japanese government bond yield recently hit 3%, the highest level since September 1996. Expectations for an imminent rate increase by the Bank of Japan have also contributed to the upward pressure on yields.
On the currency side, the yen has strengthened in recent sessions after snapping a run of persistent weakness. The currency was last trading at 156.05 per dollar, after briefly reaching a one-month high around the time Tokyo intervened in the foreign-exchange market in coordination with Washington. Yields in Japan remain elevated, in line with other global bonds, but the yen is finally showing some signs of recovery.
On the rate-pressure question, Katayama said she had explained Takaichi’s pursuit of both sustainable debt conditions and economic growth to Bessent when they met on the sidelines of the Group of 20 finance chiefs’ meeting. When she showed him a local newspaper article about the topic, Bessent responded by saying “good,” Katayama said.
Those expecting Katayama to comment on the yen on Friday were left waiting.