US Treasury Chief Urges BOJ to Anchor Inflation, Avoid Yen Volatility

US Treasury Secretary Scott Bessent has called on Bank of Japan (BOJ) Governor Kazuo Ueda to conduct sound monetary policy to anchor inflation expectations and prevent excessive volatility in the yen. The remarks, made during a meeting on the sidelines of the G20 finance leaders' gathering in Asheville, North Carolina, have strengthened the case for a Japanese rate hike later this month.

The Treasury Department stated that Bessent expressed strong support for Japan's decisive steps to address the yen's substantial undervaluation. He also noted the role of yen weakness in contributing to domestic inflationary pressures within Japan, which have been pushing up import prices and raising the cost of living for households.

The meeting between Bessent and Ueda took place on Sunday, ahead of the conclusion of the two-day G20 meeting on Tuesday. Japanese Finance Minister Satsuki Katayama was also in attendance.

These comments come after the US and Japan conducted a rare joint yen-buying intervention on July 31 to prevent a selloff in the currency and Japanese government bonds from destabilising global markets. However, that move has not provided a lasting floor under the yen, keeping market attention on the possibility of further action.

Bessent has previously indicated that recent yen moves were not disorderly, instead calling for BOJ rate hikes and expressing confidence that Ueda would take the right steps to combat the currency's decline. With markets already pricing in a high chance of a September move, following the BOJ's increase of its policy rate to a 31-year high of 1% in June, Bessent's latest remarks are seen as effectively locking in the expected hike at the central bank's next meeting on September 17-18.