By Toru Fujioka

(Bloomberg) — The US Treasury called on the Bank of Japan to raise interest rates to strengthen the yen, stepping much deeper into policy recommendations for Tokyo than before in its semiannual currency report.

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“BOJ policy tightening should continue to proceed in response to domestic economic fundamentals including growth and inflation, supporting a normalization of the yen’s weakness against the dollar and a much-needed structural rebalancing of bilateral trade,” the Treasury Department said in a report released Thursday in Washington.

The report, the first formal assessment of US trading partners’ foreign-exchange practices since President Donald Trump returned to office, is likely to support market speculation for the BOJ to raise borrowing costs again later this year. Japan’s inflation is the highest among Group of Seven nations while its benchmark interest rate of 0.5% stands far below that of its peers.

Japan’s Finance Minister Katsunobu Kato said Friday in Tokyo that monetary policy is in the purview of the BOJ and that he doesn’t comment on the views of a foreign government.

Trump in March accused Japan of gaining an unfair trade advantage by devaluing its currency, while the nation’s Ministry of Finance has intervened multiple times over the past few years to correct excessive yen weakening. Treasury Secretary Scott Bessent has said it’s natural for the yen to strengthen as the BOJ proceeds with rate hikes.

The BOJ holds its next policy meeting on June 16-17, when the board is widely expected to keep the benchmark rate unchanged.

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