US Treasury Secretary Urges BOJ to Stabilize Yen, Bolstering Rate Hike Expectations

U.S. Treasury Secretary Scott Bessent urged Bank of Japan Governor Kazuo Ueda to pursue a sound monetary policy to stabilize inflation expectations and prevent excessive volatility in the yen, according to a U.S. Treasury Department statement released Tuesday. The remarks, made during a G20 meeting, add to growing market expectations for an interest rate hike by the Japanese central bank.

Treasury's Stance on Yen Volatility

The meeting between the two officials took place Sunday on the sidelines of the G20 Finance Ministers and Central Bank Governors conference in Asheville, North Carolina. According to the Treasury's statement, Bessent emphasized that a well-formulated and clearly communicated monetary policy is essential for anchoring inflation expectations and avoiding disruptive currency fluctuations.

Bessent also reportedly expressed support for Japan's measures to address the yen's undervaluation. The Treasury noted his view that the yen's weakness has been a contributing factor to domestic inflationary pressures within Japan.

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Market Impact and Outlook

These comments from the U.S. Treasury are seen by market participants as further strengthening the case for the Bank of Japan to raise interest rates at its upcoming policy meeting on September 17-18. A persistently weak yen has become a significant headwind for the Japanese economy.

The currency's depreciation has driven up the cost of imported goods, fueling broader inflation and putting pressure on Japanese household budgets. The G20 meeting, which concluded Tuesday, was also attended by Japanese Finance Minister Satsuki Katayama.