Bessent signals expectation Japan will raise rates to strengthen yen

US Treasury Secretary Scott Bessent has publicly signalled his expectation that Japan will strengthen its currency by raising interest rates, delivering the message during a Group of 20 finance leaders' gathering in Asheville, North Carolina.

In an interview with CNBC on Monday, Bessent said he believes the Japanese government and the Bank of Japan will take steps to support a stronger yen, adding that he possesses "information that the market doesn't have". When pressed on whether his remarks referred specifically to interest rate increases, he responded: "I think the market's pricing that in now".

The comments built on statements Bessent made a day earlier, when he said he expected BOJ Governor Kazuo Ueda to "do the right thing" on monetary policy to address yen weakness.

Market reaction and policy expectations

The yen strengthened against the dollar following Bessent's remarks, which aligned with prevailing market expectations that the Bank of Japan will raise rates at its next policy meeting in September.

Japan's currency weakness has driven up import prices and contributed to broader inflation, a trend partly attributed to the slow pace of interest rate hikes by the central bank. The Treasury secretary's unusually direct commentary on another country's monetary policy adds external pressure on Japanese policymakers as they weigh their next move on rates.

Source: South China Morning Post