The reason for Japan's interest rate hike is because the United States demanded Japan to raise interest rates. The U.S. Treasury Secretary has repeatedly urged the Bank of Japan to adopt more sound monetary policies, including allowing interest rate hikes, to reduce frequent interventions in the foreign exchange market. Why does the U.S. want this to happen?

The continuous depreciation of the yen would force Japanese authorities to use their foreign exchange reserves to intervene in the market, and a large portion of these reserves are held in U.S. Treasuries (Japan is the largest overseas holder of U.S. debt, with holdings exceeding $1 trillion). Intervention often involves selling U.S. Treasuries to obtain dollars, which pushes up U.S. Treasury yields, increases borrowing costs for the U.S. government, and could even exacerbate the U.S. debt crisis. Therefore, the U.S. urging Japan to raise interest rates is to gently appreciate the yen, compress the U.S.-Japan interest rate differential, and thus reduce intervention demand.