BOJ Faces Critical Rate Decision as US Presses for Faster Hikes

The Bank of Japan (BOJ) is facing increasing pressure to raise interest rates and abandon its loose monetary policy, following a joint intervention by the US and Japan in July to support the yen. US Treasury Secretary Scott Bessent has declared that the era of massive stimulus is over, signaling that the BOJ must act to combat the weak yen.

The weak yen has pushed up import prices and headline inflation, raising household living costs and creating a headache for Japanese policymakers. Bessent's comments effectively boxed in the central bank, while increasing pressure for a faster pace of rate hikes going forward.

Markets are focused on potential remarks by BOJ Governor Kazuo Ueda following his participation in a two-day meeting of G20 finance leaders. A US Treasury official told Japanese public broadcaster NHK that Bessent met Ueda on Sunday and conveyed that interest rate hikes were necessary.