Bessent says Japan will act to boost yen, signals BOJ rate hike

U.S. Treasury Secretary Scott Bessent used the G20 finance leaders' gathering in Asheville, North Carolina, to deliver a pointed message to Japan: raise interest rates and rein in fiscal spending. Speaking on the sidelines of the two-day meeting concluding Tuesday, Bessent said he believes Japan's government and central bank will take steps to strengthen the yen, claiming he has "information that the market doesn't have."devdiscourse+1

"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 on Monday. Asked whether that meant raising interest rates, he replied: "I think the market's pricing that in now."devdiscourse

Pressure Mounts on the BOJ

The remarks reinforced expectations that the Bank of Japan will raise rates at its September 17-18 policy meeting. Sources told Reuters Thomson Reuters Corporation ↗ 1.83% the BOJ is considering hiking more aggressively than its recent pace of roughly twice a year. The yen gained against the dollar following Bessent's comments, though the USD/JPY pair remained near the 160 level widely seen as a trigger for intervention.thestandard+1

Bessent met BOJ Governor Kazuo Ueda on Sunday and Japanese Finance Minister Satsuki Katayama on Monday, according to Erin Browne, undersecretary for international affairs at the U.S. Treasury Department, in an interview with NHK. In those meetings, Bessent called for further rate hikes and urged Japan to show markets a credible path to fiscal sustainability.thestandard

'Calling Time' on Abenomics

Beyond monetary policy, Bessent took aim at Japan's broader economic strategy. He suggested Japan should "sit back and enjoy the success of Abenomics and let that run," remarks analysts interpreted as a rebuke of Prime Minister Sanae Takaichi's expansionary fiscal plans.economictimes

"It's a message to the Takaichi administration to avoid excessively expansionary fiscal policy," a Japanese government official told Reuters. A senior ruling party official added that Bessent's comments suggest "the United States is escalating its demand on Japanese policy."economictimes

Intervention Without a Sequel

Bessent also defended the rare joint U.S.-Japan yen-buying intervention carried out on July 31 but signaled Washington has no appetite for a repeat, telling Reuters he did not see recent yen moves as "disorderly." That intervention failed to put a sustained floor under the currency, and former top Japanese currency diplomat Naoyuki Shinohara warned that "one or two more hikes won't be enough to reverse the yen's downtrend."devdiscourse+1

Oxford Economics now expects the BOJ to raise rates in September and December this year, followed by a third hike in April 2027 — a faster pace than initially forecast. "The economic and political cost of disappointing markets and the U.S. has become too big for the BOJ and the government to ignore," wrote Shigeto Nagai, head of Japan economics at the firm.economictimes