Bessent's Rate Hike Pressure on BOJ Ahead of September Meeting

U.S. Treasury Secretary Scott Bessent's recent comments on Japan's monetary policy have created pressure for the Bank of Japan (BOJ) to raise interest rates at its September meeting, according to several sources close to the matter.

Bessent has been promoting the joint intervention in the currency markets by Tokyo and Washington last week as a win for Japan's economy. However, he emphasized that intervention needs to be followed up with rate hikes to combat inflation concerns that have pushed up Japanese government bond yields and risked spilling over to U.S. Treasury yields.

BOJ Deputy Governor Ryozo Himino is set to deliver a speech on August 27, which may offer clues on whether the central bank will hike rates in September. A source familiar with the matter said it's clear the BOJ will raise rates either in September or October, and a meeting between Bessent and BOJ Governor Kazuo Ueda at the G20 finance leaders' gathering later this month could make it difficult for the BOJ to avoid raising rates in September.

While the BOJ has historically been independent from political interference, its law requires close coordination with the government's economic policy. The slow pace of hikes has been blamed for the yen's slide to 40-year lows by keeping the Japan-U.S. rate gap wide, and a weak yen has become a headache for policymakers due to rising import prices.