Japan's Finance Minister and BOJ Chief to Join G20 Talks in US

Japan's Finance Minister Satsuki Katayama and Bank of Japan (BOJ) Governor Kazuo Ueda are set to attend next week's Group of 20 (G20) finance leaders' meeting in Asheville, North Carolina. Their participation sets the stage for discussions on global economic challenges, including the fallout from the Middle East conflict and the persistent weakness of the Japanese yen.

The gathering comes at a critical time for currency markets. While the yen has recovered from its 40-year low near 164 per dollar, it has recently slipped back towards the 160 level, trading around 159.60 on Friday. This follows a coordinated Japan-US intervention last month that briefly pushed the currency to 155.20.

Market attention is focused on whether Katayama and Ueda will hold bilateral talks with US Treasury Secretary Scott Bessent on the sidelines of the meeting. Bessent has previously expressed interest in meeting Ueda and has publicly encouraged the BOJ to raise interest rates as part of efforts to stabilize the yen.

Speaking at a press conference on Friday, Katayama acknowledged the ongoing challenge of the weak yen, noting that the joint statement with Bessent on intervention remains significant. She also emphasized that government efforts to boost investment and strengthen Japan's growth potential would help enhance the yen's credibility.

The prospect of US pressure and recent hawkish signals from the BOJ have led markets to price in an 80-90% chance of a rate hike at the central bank's next policy meeting in September. While BOJ Deputy Governor Ryozo Himino stopped short of committing to a hike on Thursday, he stressed the need for timely rate increases and did not push back against market expectations.

"We will examine, including at the next policy meeting, the likelihood of our baseline scenario materialising as well as risks," Himino told reporters, noting that discussions would consider the fact that underlying inflation was approaching the BOJ's 2% target.