Bessent expects Japan, BOJ to act to strengthen yen as September rate-hike bets grow

[ASHEVILLE, North Carolina] US Treasury Secretary Scott Bessent said he believes Japan’s government and central bank will take action that leads to a stronger yen, CNBC reported on Monday (Aug 31), signalling a strong chance of a Bank of Japan interest rate hike in September.

The remarks followed those by Bessent on Sunday, when he told Reuters he expects BOJ governor Kazuo Ueda to “do the right thing” on monetary policy to combat yen declines.

“I have information that the market doesn’t have, and it’s my belief that the Japanese government and the BOJ will do the things that will lead to a stronger yen,” Bessent told CNBC in an interview during a Group of 20 finance leaders’ gathering in Asheville, North Carolina.

When asked whether that meant raising interest rates, Bessent said: “I think the market’s pricing that in now.”

The yen gained against the US dollar after Bessent’s comments, which reinforced dominant market expectations the BOJ will raise rates at its next policy meeting in September.

The US dollar stood at 159.75 yen on Monday, still close to the 160 mark that is seen as heightening the chance of yen-buying intervention.

Bessent met Ueda on Sunday and Japanese Finance Minister Satsuki Katayama on Monday, a senior US Treasury Department official told Japanese public broadcaster NHK on Monday.

In the meetings, Bessent called for the need for further rate hikes and for Japan to clearly show markets how it would achieve fiscal sustainability, Erin Browne, under-secretary for international affairs at the US Department of the Treasury, was quoted as saying in an interview with NHK. Reuters could not confirm that the meetings took place.

Sources have told Reuters the BOJ is set to raise rates as soon as its Sep 17-18 meeting and is considering hiking more aggressively than the current pace of roughly two times a year after that session.

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Bessent’s repeated calls for BOJ rate hikes have been among the factors that led markets to nearly fully price in the chance of a September hike. The Japanese central bank raised rates in June.

A hike in September, rather than in October, could fuel market bets the BOJ will raise rates once every quarter, some analysts said.

A weak yen has pushed up import prices and broader inflation, causing headaches for Japanese policymakers. It has been blamed in part on the slow pace of rate hikes by the BOJ, which has kept Japan’s rate divergence with the US wide.

Japan and the US carried out a rare joint yen-buying intervention on Jul 31, signalling their determination to prevent a sell-off in the yen and Japanese government bonds from spilling over into global markets.

While that action failed to put a sustained floor under the yen, Bessent told Reuters he did not see recent yen moves as disorderly, suggesting Washington was in no mood to join Tokyo for another foray into the market to prop up the currency. REUTERS