Bessent says BOJ’s Ueda will ‘do what is best’ amid rate hike pressure

U.S. Treasury Secretary Scott Bessent said he is confident Bank of Japan Governor Kazuo Ueda will "do what is best" for Japan's economy, in remarks reported by NHK on Wednesday that markets widely interpreted as pressure for a near-term interest rate hike to address structural yen weakness.kelo

"I do believe that part of the inflation uptick in Japan was a result of the weak yen and also the energy prices," Bessent told NHK. As energy prices come down and excessive yen weakness is corrected, Japan's inflation will slow, allowing "a virtuous cycle," he said.kelo

Intervention Alone Not Enough

The comments follow a joint U.S.-Japan yen-buying intervention last week — the first coordinated currency operation between Washington and Tokyo since 2011 — in which Japan deployed an estimated $96 billion over two days to lift the yen from 40-year lows near 164 per dollar. Bessent told CNBC that Japan had "come out of deflation" and that fixing the yen required "policies that change markets," not intervention alone.fortune+1

Fortune reported that Bessent's credibility on the yen stems from decades of experience, including helping George Soros and Stanley Druckenmiller short the British pound in 1992. RSM chief economist Joe Brusuelas told Fortune that Bessent "clearly understands the yen in a way most Treasury secretaries or Fed chairmen would not."fortune

BOJ Builds the Case for September

The BOJ held its policy rate at 1 percent at its July 30–31 meeting but released a hawkish outlook report containing upward revisions to GDP growth forecasts and warnings that AI-related global demand may exert "sticky and lasting upward influence" on consumer inflation. Governor Ueda said at his press conference that the risk of Japan returning to deflation had diminished and that clear signs of rising inflation expectations had emerged, prompting markets to raise the implied probability of a September hike.fundssociety+1

Producer prices in Japan climbed to 7.1 percent year-on-year in June, driven by energy costs and semiconductor-linked industries, while the yen's weakness has amplified import price inflation to nearly 30 percent in yen terms. BofA interest rate strategist Tomonobu Yamashita said Ueda's hawkish tone "suggested the possibility of a faster pace of rate hikes."businesstimes+1

A Weak Link?

Yet skeptics remain. The Japan Times called Ueda "the weak link" in the trans-Pacific effort to strengthen the yen, noting that only one BOJ board member voted for an immediate hike in July. Mark Sobel, a former Treasury official, told Fortune the intervention was "ill-advised" without corrective Japanese fiscal policy.japantimes+1

Bessent said he plans to meet Ueda at a U.S.-hosted G20 finance leaders' meeting at the end of August, ahead of the BOJ's September 17–18 policy meeting — a timeline that keeps pressure squarely on Tokyo to act.kelo