The US Treasury designated Japan as a currency monitoring country on July 23 (local time) and recommended the Bank of Japan (BOJ) continue raising interest rates, according to a semiannual report to Congress. The Treasury stated that while global factors like financial market volatility and oil prices may have affected the yen, excessive yen volatility is undesirable. The report noted that monetary policy normalization would help stabilize inflation expectations and mitigate excessive exchange rate volatility, citing the yen's 51% depreciation from end-2011 to April 2026 in both real effective and dollar terms as evidence of significant yen undervaluation.
Treasury Recommends BOJ Continue Monetary Policy Normalization
The US Treasury stated in its report titled "Macroeconomic and Foreign Exchange Policies of Major Trading Partners" that the BOJ has been gradually normalizing monetary policy. The Treasury noted that "monetary policy normalization will help stabilize inflation expectations and mitigate excessive exchange rate volatility." The report pointed out that "yen weakness persisted despite the actual narrowing of the US-Japan interest rate differential."
Yen Depreciated 51% From End-2011 to April 2026
The Treasury explained that the yen depreciated 51% from end-2011 to April 2026 in both real effective exchange rate and dollar terms, resulting in "significant yen undervaluation." The report characterized the yen's excessive fluctuations as undesirable, noting that global factors including financial market volatility and oil prices may have influenced the yen.
Ten Countries Designated as Currency Monitoring Countries
The countries designated as currency monitoring countries in this report are South Korea, China, Japan, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland - the same 10 countries as in the previous report released in January. The Treasury added that it will continue close consultations with Japan's Ministry of Finance on macroeconomic and foreign exchange matters, as outlined in the September 2025 joint US-Japan Treasury Ministers' statement.
FAQ
When did the US Treasury designate Japan as a currency monitoring country?
The US Treasury designated Japan as a currency monitoring country on July 23 (local time) in its semiannual report to Congress on macroeconomic and foreign exchange policies of major trading partners.
How much has the yen depreciated according to the Treasury report?
According to the US Treasury report, the yen depreciated 51% from end-2011 to April 2026 in both real effective exchange rate terms and against the dollar, which the Treasury characterized as significant yen undervaluation.
Which countries are on the US currency monitoring list?
The 10 countries designated as currency monitoring countries are South Korea, China, Japan, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland - the same list as in the previous report released in January.
