US and Japan disagree on interest rate strategy for yen defense

The United States and Japan intervened together in currency markets in August 2026 to support the weakening yen. However, the two governments disagreed publicly about how to fix the problem. US Treasury Secretary Scott Bessent said the Bank of Japan should raise interest rates to strengthen the yen. Japanese Prime Minister Sanae Takaichi opposed fast rate rises because she worried they would hurt Japan's economic recovery. After the joint intervention, the Bank of Japan kept its interest rates unchanged. Market watchers said this decision reduced the impact of the currency operation. The yen continued to fall and moved close to 160 per dollar. One Bank of Japan board member also argued that the bank should continue reducing its government bond purchases to keep markets stable.