U.S. Treasury Secretary Scott Bessent urged Japan to raise interest rates to strengthen the yen, signaling a potential Bank of Japan hike in September as markets price in the move.
U.S. Treasury Secretary Scott Bessent signaled a strong likelihood of a Bank of Japan (BOJ) interest rate hike in September, urging Japan to take action to bolster the yen. His remarks, made during a Group of 20 finance leaders’ gathering in Asheville, North Carolina, reinforced market expectations that the BOJ would raise rates to curb the currency’s decline. Bessent told CNBC in an interview, 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.
His comments followed meetings with BOJ Governor Kazuo Ueda and Finance Minister Satsuki Katayama, where he emphasized the need for fiscal sustainability and monetary tightening, according to a senior U.S. Treasury official quoted by NHK.
US Treasury’s Bessent calls on Japan to boost yen
Katayama confirmed the discussions, stating that orderly yen movements were critical for global market stability. However, she declined to comment on whether recent yen fluctuations were “orderly,” according to a senior Japanese official present at the meeting. The two leaders also discussed Japan’s financial policy, the earlier coordinated yen intervention, and other topics, the official said. Bessent’s remarks came amid growing pressure on the BOJ to address the yen’s decline, which has weakened past the 160-per-dollar level, a threshold seen as heightening the chance of yen-buying intervention.
The yen steadied near 160 per dollar after Bessent’s remarks, though it had weakened past the level in prior sessions. The dollar stood at 159.75 yen on Monday, close to the 160 mark. Analysts noted that markets are pricing in a 73% chance of a BOJ rate hike later this month. A rare joint U.S.-Japan currency intervention in July temporarily supported the yen but failed to halt its decline.
Yen lingers near 160 as Bessent leans on BOJ
Bessent’s calls for tighter monetary policy have contributed to the yen’s recent resilience. The 10-year Japanese government bond yield touched 3% for the first time in 30 years, while the yield on 10-year Treasury notes hit its highest since January 2025. Meanwhile, renewed Gulf attacks pushed Brent crude futures above $91 a barrel, adding to inflationary pressures. The yen’s struggles have intensified scrutiny of Japan’s debt position and the interaction between fiscal policy and BOJ tightening, with analysts emphasizing the need for the BOJ to show a clearer commitment to inflation control.
The U.S. dollar weakened slightly after Bessent’s comments, with the euro falling to $1.16045 and sterling rising to $1.35424. Analysts attributed the shift to heightened expectations of a September BOJ rate hike, which could further pressure the dollar. The overnight USD weakness may reflect markets reassessing whether Chair Warsh’s hawkish stance is sufficient to restore Fed credibility, said Carol Kong, a currency strategist at Commonwealth Bank of Australia. The BOJ’s decision in September will be closely watched for signals of a more aggressive tightening path, with some analysts arguing that a single increase may not be enough to sustain gains.
Bessent expects Japan to take action to boost yen
Bessent’s message marks a notable shift in emphasis from currency intervention toward monetary and fiscal policy measures. Japan and the United States carried out a rare joint currency intervention in July to support the yen, but the currency subsequently weakened again below 160 per dollar. The pressure on Japan reflects the widening gap between its still-low interest rates and those in the United States, as well as investor concerns over the government’s expansionary fiscal stance. The benchmark has risen sharply, adding to scrutiny of Japan’s debt position and the interaction between fiscal policy and BOJ tightening.
The BOJ’s next policy meeting is scheduled for September 17-18, with economists increasingly expecting another rate increase. Sources have told Reuters the BOJ is set to raise rates as soon as its September 17-18 meeting and is considering hiking more aggressively than the current pace of roughly two times a year after that session. For now, the yen remains under pressure, with the BOJ facing mounting pressure to align its policy with global rate trends. Bessent’s interventions highlight the growing coordination between U.S. and Japanese officials to stabilize the currency, though the long-term success of these efforts remains uncertain.
Bessent met Ueda on Sunday and Katayama on Monday, a senior U.S. Treasury Department official told Japanese public broadcaster NHK on Monday. Reuters could not confirm that the meetings took place, but the sources indicate that Bessent’s pressure on Japan reflects broader concerns about the yen’s stability and its implications for global markets.
