Bessent Signals Strong Chance of Japanese Rate Hike

US Treasury Secretary Scott Bessent has expressed his expectation that Japan will take action to boost the yen, which could lead to a Bank of Japan interest rate hike in September. Speaking at a Group of 20 finance leaders' gathering in Asheville, North Carolina, Bessent said he believes the Japanese government and central bank will do what is necessary to lead to a stronger yen.

When asked if this meant raising interest rates, Bessent replied: 'I think the market's pricing that in now.' The yen gained against the dollar after his comments, which reinforced dominant market expectations for a BOJ rate hike at its next policy meeting on September 17-18. Sources have told Reuters that the BOJ is set to raise rates as soon as this session and may consider hiking more aggressively than the current pace of roughly two times a year.

Bessent's repeated calls for BOJ rate hikes have been among the factors leading markets to nearly fully price in the chance of a September hike. The Japanese central bank raised rates in June, but has been criticized for keeping Japan's rate divergence with the US wide. A weak yen has pushed up import prices and broader inflation, causing headaches for Japanese policymakers.