US Treasury Secretary Scott Bessent has repeatedly signaled that Japan needs to raise interest rates to support the yen, and after meeting with Bank of Japan Governor Kazuo Ueda, he further indicated his backing for such a move. According to a readout of the talks released by the Treasury Department on Tuesday, Bessent "strongly supports Japan's decisive market and monetary policy measures to address the clearly undervalued yen, noting that the yen's weakness is intensifying domestic inflationary pressures in Japan."
The meeting took place on Sunday in Asheville, North Carolina, where both officials were attending the Group of Twenty finance ministers and central bank governors meeting.
Investors are increasingly expecting the BOJ to raise its policy rate at the September 18 meeting. As of Tuesday, overnight indexed swaps implied roughly a 99% probability of a hike, more than double the level from a month ago. Bessent has repeatedly stated that the BOJ needs to take further action, telling reporters on Monday that he believes "the Japanese government and the BOJ will take measures that help strengthen the yen."
The meeting between Bessent and Ueda draws particular attention following the rare coordinated currency intervention by the US and Japan on July 31 to support the yen. Bessent wrote on social media on Tuesday: "It was a pleasure to welcome my old friend, BOJ Governor Kazuo Ueda, to the beautiful Blue Ridge Mountains for the G20 finance ministers and central bank governors meeting."
Bessent's support for the yen and his calls for higher rates also add pressure on Japanese Prime Minister Shigeru Ishiba, whose administration has signaled a preference for keeping borrowing costs low, placing it at odds with the direction Bessent is advocating for the central bank. The Treasury readout also noted that Bessent "stressed the importance of well-calibrated and well-communicated monetary policy to anchor inflation expectations and avoid excessive exchange rate volatility."
Ueda is expected to brief reporters after the G20 meetings conclude on Tuesday.
Comments