DistantNews
Support us
🇸🇬 Singapore /Economy & Trade

Japan faces policy reckoning as Bessent calls time on big stimulus

From The Straits Times · () English

Translated from English and summarized by DistantNews. Read the original for the full story.

At a glance

Analysis Named sources Ongoing story
  • U.S. Treasury Secretary Scott Bessent urged Japan to raise interest rates and move away from large fiscal stimulus after a joint intervention to support the yen.
  • The Bank of Japan is widely expected to raise rates in September as inflation pushes up import costs and household expenses.
  • Economists said the central bank may need to accelerate future increases because weak real interest rates continue to pressure the yen.

The United States joined Japan to support the yen, but Treasury Secretary Scott Bessent made clear that Washington expects Tokyo to handle more of the problem itself. He urged Japan to raise interest rates and abandon what he described as outdated ideas about large economic stimulus.

Bessent said recent yen movements were not disorderly, signaling little appetite for another market intervention. Instead, he expressed hope that Bank of Japan Governor Kazuo Ueda would “do the right thing” on monetary policy. A U.S. Treasury official separately told Japanese broadcaster NHK that Bessent met Ueda in Asheville, North Carolina, on Sunday and discussed the need for rate increases.

do the right thing

— Scott BessentThe U.S. Treasury secretary said he hoped BOJ Governor Kazuo Ueda would take appropriate monetary-policy action to address the weak yen.

The BOJ was already widely expected to raise rates in September as inflationary pressure grows. But Bessent’s comments have increased pressure on the bank to move faster afterward. A weak yen has raised import prices and added to the cost-of-living burden for Japanese households.

The July joint intervention was a message from Bessent for Japan to get its act together on inflation

— Izuru KatoThe Totan Research chief economist described the significance of the joint U.S.-Japan intervention.

Japanese economists said the challenge may require more than one immediate increase. Izuru Kato of Totan Research called the July intervention a message for Japan to address inflation. Former senior currency diplomat Naoyuki Shinohara said real interest rates remained too low and that one or two additional increases would not be enough to reverse the yen’s decline. Oxford Economics expects hikes in September and December, followed by another in April 2027.

The pressure is financial and political. Slow BOJ increases and loose fiscal policy could trigger further selling of the yen and Japanese government bonds, with possible effects on U.S. Treasury yields. Shigeto Nagai of Oxford Economics said the cost of disappointing markets and Washington had become too large for Japan’s central bank and government to ignore.

One or two more hikes won't be enough to reverse the yen's downtrend

— Naoyuki ShinoharaJapan’s former senior currency diplomat argued that the BOJ needed a faster pace of rate increases.
About this summary

Originally published by The Straits Times in English. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

More Stories

From Our Blog