Bessent Meets Directly with Japanese Finance Minister and BOJ Governor: "Urges Rate Hike"

Direct Talks Held on July 30-31 at G20 Summit
Erin Brown Discloses Details to NHK
All Eyes on BOJ Meeting Scheduled for September 17-18

Scott Bessent, U.S. Secretary of the Treasury, is being interviewed by the Associated Press on the 30th of last month (local time). Photo by AP News.

Scott Bessent, the U.S. Treasury Secretary, who has publicly emphasized the need for Japan to raise interest rates sooner, reportedly met with Japanese Finance Minister Satsuki Katayama and Bank of Japan (BOJ) Governor Kazuo Ueda to directly urge a rate hike.

Erin Brown, U.S. Under Secretary of the Treasury for International Affairs, stated in an interview with Japan's NHK on July 31 (local time) that these meetings took place on the sidelines of the G20 Finance Ministers and Central Bank Governors Meeting held in North Carolina, United States.

According to NHK, Secretary Bessent met with Governor Ueda on July 30 and with Finance Minister Katayama on July 31, separately, emphasizing the need for an additional interest rate increase at each meeting. Bessent also reportedly told Japanese officials that Japan must clearly demonstrate to the market how it will secure fiscal sustainability.

Bessent has externally called on the Japanese government and the BOJ to raise rates. In an interview with CNBC on that day, he said, "I have information that the market doesn’t have," adding, "I believe the Japanese government and the BOJ will take actions that will lead to yen appreciation." When asked if this implied a rate hike, he responded, "I think the market is already pricing that in."

In other interviews with foreign media around the same time, he also stated that the recent weakness of the yen has not reached a "disorderly" level and expressed confidence that Governor Ueda would "do the right thing" regarding monetary policy. This has been interpreted to mean that yen weakness should be addressed through BOJ rate hikes rather than direct market intervention.

In fact, immediately after Bessent's remarks, the yen strengthened. After the dollar-yen exchange rate had once again exceeded 160 yen on July 28, it decreased to 159.75 yen by July 31. Since yen weakness resumed even after joint yen-buying intervention by the U.S. and Japanese governments on July 31, market attention is shifting away from additional government intervention and towards whether the BOJ will raise interest rates.

Kazuo Ueda, Governor of the Bank of Japan (BOJ), is holding a press conference at the BOJ headquarters in Tokyo, Japan on July 31. Photo by AFP Yonhap News Agency

In the markets, there is a strong expectation that the BOJ will raise interest rates at the Monetary Policy Meeting scheduled for September 17-18. The Financial Times reported that "the market currently sees a greater than 90% probability that the BOJ will raise rates next month."

However, there continue to be arguments that intervention in the foreign exchange market alone is unlikely to reverse the major trend of yen weakness. This is because Japan's real interest rate remains significantly negative, and there are limits to how quickly the BOJ can raise rates beyond market expectations.

Sim Moh Siong, a strategist at OCBC Bank in Singapore, said, "The BOJ faces a dilemma in that it is difficult to raise rates well above market expectations," adding, "To reverse yen weakness, other policy measures, such as encouraging the repatriation of overseas funds, will also be necessary."

This content was produced with the assistance of AI translation services.