U.S. Treasury Secretary Scott Bessent met with Bank of Japan Governor Kazuo Ueda and Finance Minister Satsuki Katayama on the sidelines of the G20 finance leaders' gathering in Asheville, North Carolina. A senior U.S. Treasury official informed NHK that Bessent pressed Japanese officials to present a clear roadmap for fiscal sustainability and to signal higher interest rates to the markets. This reflects a shift in U.S. emphasis towards long-term monetary and fiscal tools rather than immediate currency intervention, even as the yen remains under pressure near the 160 per dollar mark.
Bessent's discussions occurred as the yen trades close to the psychologically significant 160 per dollar level, a point that has historically heightened the likelihood of Japanese intervention. Market expectations for a Bank of Japan rate hike in September have been growing, with economists now anticipating the policy rate to reach at least 1.5% by the end of March 2027. Bessent's repeated public calls for BOJ tightening are cited as a key factor driving these market expectations, reinforcing the dominant view that the BOJ will raise rates at its upcoming September 17-18 meeting.
The yen's weakness is largely attributed to the significant interest rate differential between Japan and the United States. Although Japan and the U.S. conducted a joint yen-buying intervention on July 31, Bessent has indicated that he does not view recent yen movements as disorderly, suggesting a reluctance from Washington to engage in further joint market interventions. Instead, he expects Japan's government and central bank to take actions, including rate hikes, that will lead to a stronger yen, potentially moving to a quarterly hiking cadence rather than just two increases a year.
Bessent told CNBC that he has information not available to the market, leading him to believe that Japanese authorities will take steps to strengthen the yen. When asked if this meant raising interest rates, Bessent stated that the market is already pricing this in. The dollar was last seen around 159.75 yen following his comments, reinforcing market expectations for a September rate hike. The pressure on the yen also comes as 10-year Japanese government bond yields have risen sharply, intensifying debates about Japan's fiscal sustainability.
