Bessent Pushes BOJ Towards Rate Hike in September

US Treasury Secretary Scott Bessent's recent public comments on Japan's monetary policy have increased pressure on the Bank of Japan (BOJ) to raise interest rates in September. In an interview, Bessent said that BOJ Governor Kazuo Ueda will 'do what is best' for Japan's economy.

Bessent has been promoting joint intervention between Tokyo and Washington as a win for Japan's economy, but his comments have also raised questions about US influence over domestic policy. Kazuo Momma, a former BOJ executive, said that the joint intervention has given the BOJ a 'free hand' to raise rates.

The BOJ has historically come under pressure from politicians to fend off external shocks, such as volatile yen moves, with monetary policy. In keeping rates steady last week, the BOJ left scope for a hike in September by issuing its strongest warning yet on mounting risks of an inflation overshoot.

All eyes will be on a meeting between Bessent and Ueda at a US-hosted G20 finance leaders' gathering at end-August, which precedes the BOJ's September 17-18 policy meeting. Analysts expect the BOJ to raise rates again by December, possibly as soon as October.