US Treasury Chief Signals Strong Chance of BOJ Rate Hike in September

US Treasury Secretary Scott Bessent has said he believes Japan's government and central bank will take measures that lead to a stronger yen, a remark that has reinforced market expectations of an interest rate hike by the Bank of Japan (BOJ) next month.

Speaking on CNBC during a Group of 20 finance leaders' meeting in Asheville, North Carolina, Bessent said, "I have information that the market doesn't have, and it's my belief that the Japanese government and the BOJ will do the things that will lead to a stronger yen." When asked if this implied a rate increase, he responded, "I think the market's pricing that in now."

The comments follow his statement on Sunday, where he expressed confidence that BOJ Governor Kazuo Ueda would "do the right thing" on monetary policy to counter yen weakness. The yen strengthened against the dollar after these remarks, with the dollar trading around 159.75 yen, still close to the 160 level that often raises the risk of intervention.

According to Japanese public broadcaster NHK, Bessent met with Ueda on Sunday and Japanese Finance Minister Satsuki Katayama on Monday. A senior US Treasury official was quoted as saying Bessent called for further rate hikes and urged Japan to clearly communicate its fiscal sustainability plans.

Sources have indicated the BOJ is likely to raise rates at its September 17-18 meeting and may consider a more aggressive pace of hikes afterward. The central bank last raised rates in June. A hike next month could fuel expectations of quarterly increases.

A weak yen has driven up import costs and broader inflation in Japan, partly attributed to the BOJ's slow pace of tightening, which has kept a wide rate gap with the US. Japan and the US conducted a rare joint yen-buying intervention on July 31, though Bessent has said he does not view recent yen movements as disorderly, suggesting Washington may not join another intervention.