BOJ Hikes Rates to 31-Year High Amid Pressure from US Treasury Secretary Scott Bessent

The Bank of Japan (BOJ) has raised interest rates to their highest level in over three decades, marking a pivotal moment for Japan's economy. The BOJ increased its policy rate by 25 basis points to 1.25%, the highest since 1995, in a 7-2 vote on September 18. This decision was influenced by US Treasury Secretary Scott Bessent, who has been advocating for tighter monetary conditions.

Bessent's efforts date back to at least May 2026, when he held private meetings with Japanese officials, arguing that Japan's weak yen was creating imbalances and its legacy of reflation policies had run their course. He escalated his public advocacy at the G20 gathering in late August, making pointed comments about the need for Japan to stabilize its currency.

BOJ Governor Kazuo Ueda hinted that consecutive rate hikes remain on the table, with 50 basis point increases possible if conditions warrant it. The BOJ is methodically dismantling the framework of Abenomics, which was built on massive monetary stimulus to escape deflation.