The US Treasury pointed out that the yen continues to weaken despite narrowing interest rate differentials between Japan and the US, and warned that excessive volatility in the yen exchange rate is undesirable. In its semi-annual foreign exchange policy report, it stated that it will continue close consultations with Japan's Ministry of Finance on macroeconomic and exchange rate issues. It also suggested that normalizing monetary policy would help stabilize inflation expectations and curb excessive exchange rate fluctuations, hinting at the need for additional rate hikes by the Bank of Japan.