US Treasury Official Urges Japan to Raise Rates, but Finance Minister Says BOJ Has Final Say

US Treasury Secretary Scott Bessent has pressed Japan to show fiscal discipline and a clear path toward higher interest rates, but Japan’s finance minister said the two countries did not discuss monetary policy directly.

US Treasury Under Secretary for International Affairs Erin Browne said Bessent met Finance Minister Satsuki Katayama and Bank of Japan Governor Kazuo Ueda separately on Aug. 30 and 31 during the G20 finance meetings. Browne said Bessent stressed the importance of clearly demonstrating fiscal sustainability and the next steps toward rate increases.

Katayama rejected the idea that the finance ministers had discussed monetary policy. She said both sides agreed that an orderly yen exchange rate would support stability in global financial markets, including in the United States, and that Japan and the US would continue coordinating toward that goal. She reiterated that the BOJ would determine monetary policy.

Bessent had earlier told Reuters that he would not tell Japan what to do when asked whether the BOJ should consider consecutive rate increases to curb the yen’s decline. He added that, with Prime Minister Sanae Takaichi’s support, Ueda would make the “right decision” on monetary policy. Markets interpreted the remarks as indicating that Bessent viewed a rate increase as reasonable.

The BOJ is scheduled to hold its next policy meeting on Sept. 17 and 18. The bank kept its policy rate at 1% at its July meeting, when Ueda highlighted inflation risks and the possibility of accelerating rate increases. About 92% of market participants expected a hike at the next meeting, while expectations for another increase before October had been fully priced in.

The yen weakened to nearly 164 per dollar in late July. Japan’s government and central bank then spent a record 15.3993 trillion yen on large-scale intervention through Aug. 26, temporarily lifting the currency to around 155 before it weakened again. It was trading in the high 159 range after later hawkish remarks from Federal Reserve Chairman Warsh. Katayama said Japan’s position on decisive action against excessive speculation had not changed.

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Right decision