Bank of Japan Governor Ueda Kazuo holds a press conference at the BOJ headquarters in Tokyo on July 31. [AFP]
Bank of Japan Governor Ueda Kazuo holds a press conference at the BOJ headquarters in Tokyo on July 31. [AFP]

The United States and Japan's rare joint intervention in foreign exchange markets on July 31 to buy yen was driven by Washington's positive assessment of Bank of Japan Governor Ueda Kazuo's signals of an early interest rate hike, sources said.

Kyodo News and the Mainichi Shimbun reported Tuesday, citing multiple Japanese government officials, that the US joined the intervention after viewing Ueda's remarks last month as hawkish.

At a press conference following the BOJ's monetary policy meeting on July 31, Ueda said underlying inflation risked "rising above the 2 percent price stability target" and pledged to "accelerate the pace of rate hikes" if necessary. The US side took those remarks as a strong signal that Ueda intended to raise rates at the September policy meeting, and joined Japan in intervening in currency markets to curb yen weakness, according to the reports.

A senior Japanese government official said the US "spoke highly of Governor Ueda's remarks," adding that the BOJ had effectively been left with "no option other than a rate hike" at its September monetary policy meeting.

The Japanese government and the BOJ have long been concerned that excessive yen weakness could fuel inflationary pressure by pushing up import prices, and had been quietly seeking ways to rein it in. Unilateral intervention was seen as having limited effect, and Japan had reportedly been asking the US behind the scenes to intervene jointly.

The two countries' interests aligned in part because a weak yen and strong dollar can erode the competitiveness of US export industries. The intervention also reflected concerns that rising long-term Japanese government bond yields could pull US government bond yields higher, potentially cooling the US economy. For the Donald Trump administration, which faces midterm elections this fall, there was likely an added incentive to avoid voter discontent over a possible recession or elevated interest rates.

US Treasury Secretary Scott Bessent recently told the Nikkei in an interview that Japan should move away from its low interest rate policy.

Without explicitly calling for a rate hike, Bessent said he had known Ueda "for 15 years" and that he "deeply trusted" the governor's "exceptional market instincts." The remarks were widely interpreted as an indirect expression of US expectations for a BOJ rate increase.


yckim6452@heraldcorp.com