Bessent tells BOJ governor he supports 'decisive' market and monetary steps; Japan's 10-year bond yield nears 3%, highest in 30 years

US Treasury Secretary Scott Bessent answers reporters' questions at the G20 finance ministers' meeting in Asheville, North Carolina, on Tuesday (local time). [AP]
US Treasury Secretary Scott Bessent answers reporters' questions at the G20 finance ministers' meeting in Asheville, North Carolina, on Tuesday (local time). [AP]

US Treasury Secretary Scott Bessent said the Japanese yen is undervalued and that he supports Japan taking "decisive" action to address it.

The Treasury Department said Tuesday that Bessent made the remarks when he met Bank of Japan Governor Kazuo Ueda on the sidelines of the G20 finance ministers' meeting in Asheville, North Carolina, on Monday (local time).

Bessent expressed "strong support for Japan's decisive market and monetary policy actions to address the substantial undervaluation of the yen," the Treasury said in a readout.

He said yen weakness "is contributing to inflationary pressures within Japan" and said "it is important to formulate monetary policy soundly and communicate it appropriately with markets in order to stabilize inflation expectations and avoid excessive exchange rate volatility."

Bessent also said "close coordination between the United States and Japan is important with respect to the macroeconomic priorities the two countries share." His emphasis on "sound monetary policy" and "market communication" was widely interpreted as a call for the Bank of Japan to raise interest rates and send a clear signal to markets that further hikes are coming, in order to arrest the yen's slide.

Earlier, Erin Brown, the Treasury's undersecretary for international affairs, told Japan's NHK in an interview that Bessent had met both Ueda and Japanese Finance Minister Satsuki Katayama and stressed fiscal sustainability and the need to clarify the path toward rate hikes. Bessent met Katayama separately on Sunday.

Bessent told both Ueda and Katayama that "it is important, as a next step, to clearly present to markets the path toward fiscal sustainability or interest rate increases," according to Brown. The "next step" reference appeared to point to measures following the joint US-Japan currency intervention in late July, when the two governments bought yen in large volumes to prop up the currency.

At the time of that joint intervention, the yen had fallen to around 164 per dollar — its weakest level in 40 years — before retreating to around 155 after the operation. But the yen climbed back above 160, briefly touching 160.20 in New York foreign exchange trading on Friday, prompting assessments that the intervention's effect had run its course.

Brown said intervention "has its limits at this point" and urged Tokyo to act through policy. "I think from here, policy matters," she said.

Katayama said in a statement carried by Kyodo News that in his meeting with Bessent, the two sides "confirmed that an orderly yen exchange rate is essential for the stability of global financial markets, and that the sustained and coordinated efforts of both Japan and the United States contribute to this shared objective."

Katayama also said Japan would work to reduce its debt-to-GDP ratio and pursue "both the realization of a strong economy and fiscal sustainability." Japan's budget requests for next year are nonetheless on track to hit a record high for the fourth consecutive year, at 143 trillion yen ($892 billion).

Japan's expansionary fiscal stance, combined with rising US crude oil futures and expectations of growing inflationary pressure that have pushed up long-term US interest rates, has kept selling pressure on Japanese government bonds and driven yields higher.

Japan's 10-year government bond yield briefly touched 2.990 percent in morning trading Tuesday, putting it on the cusp of the 3 percent threshold — its highest level in roughly 30 years since 1996.

Meanwhile, Bessent and Katayama also discussed economic sanctions on Iran, NHK reported. Brown said Bessent "emphasized that it is critically important for all countries to cooperate in the economic isolation campaign to cut Iran off from the global financial network" and that Japan's support had been secured "in blocking any financial contact with Iran."


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