US Treasury Chief Backs BOJ's Decisive Steps to Counter Yen Weakness

US Treasury Secretary Scott Bessent has voiced strong support for Japan's efforts to address the yen's significant undervaluation, urging the central bank to take decisive monetary action. The remarks came during a meeting with Bank of Japan (BOJ) Governor Kazuo Ueda on the sidelines of the G20 finance leaders' gathering in Asheville, North Carolina.

The US Treasury Department stated that Bessent emphasized the importance of sound policy formulation and clear communication to anchor inflation expectations and prevent excessive exchange-rate volatility. He also noted that the yen's weakness has contributed to domestic inflationary pressures in Japan.

These comments reinforce market expectations that the BOJ will raise interest rates at its upcoming policy meeting on September 17-18. The central bank had already signaled a hawkish tilt following a recent spike in wholesale inflation, partly driven by higher import costs from the weak currency.

Bessent's endorsement effectively strengthens the case for a rate hike, which would follow the BOJ's increase of its policy rate to a 31-year high of 1% in June. Some analysts suggest that a move in September, rather than October, could fuel expectations of quarterly rate increases.

Separately, Japanese Finance Minister Satsuki Katayama also met with Bessent on Monday, where both agreed to continue coordinating to achieve orderly yen movements. In Japan, currency policy falls under the finance ministry's jurisdiction, with the BOJ acting as its agent.

The US and Japan had earlier conducted a rare joint yen-buying intervention on July 31 to prevent a selloff from spilling over into global markets. However, that move failed to provide a sustained floor under the currency, keeping attention on whether further coordinated action might be needed.