January FX rate review was initiated by Treasury Secretary Benssant – Nikkei
TL;DR
U.S. Treasury Secretary Scott Bessent's January FX review denied intervention to support the yen, causing yen volatility and highlighting scrutiny of Japan's monetary policy. The review emphasized transparent exchange rates and placed nine economies on a Monitoring List, with markets watching upcoming BOJ meetings and U.S.-Japan summits.
Tags
January FX rate review was initiated by Treasury Secretary Benssant – Nikkei
U.S. Treasury’s January FX Review Sparks Yen Volatility Amid Trade Policy Scrutiny
The U.S. Treasury Department’s recent review of foreign exchange (FX) policies, led by Secretary Scott Bessent, has intensified market focus on currency dynamics, particularly for the Japanese yen. On January 29, 2026, Bessent explicitly denied U.S. intervention in currency markets to support the yen, stating Washington was “absolutely not” engaging in such actions. This declaration followed a broader Treasury assessment of major trading partners’ exchange rate practices, underscoring the administration’s commitment to addressing perceived unfair currency manipulation.
The yen weakened against the dollar following Bessent’s remarks, reflecting investor concerns over the U.S. stance on Japan’s monetary policy. The Bank of Japan (BOJ) faces mounting pressure to normalize interest rates, as Washington appears to favor rate hikes as a remedy for yen depreciation. This aligns with the Treasury’s semiannual report, which highlighted the need for transparent exchange rate policies and reiterated that no major trading partner met the criteria for currency manipulation during the four quarters ending December 2024.
The Treasury’s “Monitoring List” includes nine economies—China, Japan, Korea, Taiwan, Singapore, Vietnam, Germany, Ireland, and Switzerland— due to their significant trade volumes and potential macroeconomic imbalances. While China was not designated a currency manipulator in the latest report, the Treasury emphasized its lack of transparency in exchange rate practices, warning of future scrutiny if evidence of intervention emerges.
As the U.S. administration prioritizes reducing trade deficits and curbing unfair currency practices, markets remain attentive to policy signals. The upcoming March BOJ meeting and a bilateral summit between U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi could further influence Japan’s monetary trajectory. For now, the yen’s trajectory appears tied to both domestic policy choices and evolving U.S. trade enforcement strategies.
This review underscores the Treasury’s expanded focus on macroeconomic policies beyond traditional FX intervention, including capital controls and central bank swaps. Investors are advised to monitor developments in the Monitoring List economies and the U.S. administration’s potential countermeasures against perceived imbalances.
