Bessent's Comments Spur Rate Hike Speculation at BOJ

U.S. Treasury Secretary Scott Bessent's public comments on Japan's monetary policy have increased pressure on the Bank of Japan (BOJ) to raise interest rates in September.

Bessent, who has been promoting the joint intervention between Tokyo and Washington to shore up the yen as a win for Japan's economy, emphasized that intervention needs to be followed by rate hikes to address market fears that the BOJ is behind the curve in combating inflation.

BOJ Governor Kazuo Ueda will meet with Bessent at a G20 finance leaders' gathering later this month, which precedes the BOJ's September 17-18 policy meeting. Analysts say it would be difficult for the BOJ to avoid raising rates in September if the meeting takes place.

Kazuo Momma, a former BOJ executive and current economist at Mizuho Research Institute, said that intervention is a strategy that buys time but should be followed by rate hikes. He warned that blocking rate hikes would be an act of betrayal to the United States, given Japan's law granting independence from political interference.

A majority of analysts polled by Reuters expect the BOJ to raise rates again by December and possibly as soon as October. Hiking in September could fuel market bets that the BOJ will raise rates once every quarter.