WASHINGTON: US Treasury Secretary Scott Bessent says he expects Bank of Japan (BoJ) Governor Kazuo Ueda “to do the right thing” on monetary policy, Reuters reports in the latest comments from the Treasury secretary that fuel expectations of an early rate move.
“I’m not going to tell them what to do,” Bessent said on Sunday, when asked whether the central bank should consider consecutive interest-rate hikes to combat the weak yen.
“I’m going to say that I do think that we probably reached the end of Abenomics, which was a reflationary programme.”
His remarks come as he is expected to meet Ueda on the sidelines of the Group of 20 finance leaders’ two-day gathering in Asheville, North Carolina, starting yesterday.
Bessent was speaking after the yen breached the 160 mark against the US dollar for the first time since Japan intervened in markets a month ago to prop up the currency.
The United States also participated in its first coordinated move with Japan to prop up the yen since 1998.
The yen edged higher after the secretary’s remarks and was trading around 159.80 late morning in Tokyo yesterday.
Both Bessent and Japanese Finance Minister Satsuki Katayama warned in early August that they were willing to step into the market again without hesitation after confirming their joint intervention.
The Treasury secretary has repeatedly hinted over the past year that he would prefer that the BoJ raise interest rates to help the yen rather than see repeated intervention in the market.
Japan’s Finance Ministry announced last Friday that its intervention in the market over the preceding month hit a record 15.4 trillion yen (US$96.4bil).
The United States has yet to disclose how much yen it bought, but the sum is expected to be far smaller.
The move to help Japan with its struggling currency has drawn criticism within the United States from Democrats.
In a sometimes-scathing response to an inquiry about the yen operation by Democratic Senator Elizabeth Warren last week, Bessent defended the move to support the yen, saying that any extreme volatility in the Japanese currency could feed through to higher US interest rates.
Expectations that the BoJ will raise rates at a faster pace have mushroomed since the joint intervention.
Overnight swaps yesterday morning pointed to an 88% likelihood of a rate hike at the central bank’s September meeting. — Bloomberg
