Bessent says yen moves ‘pretty contained’ and not disorderly
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A notepad in front of US Treasury Secretary reads "To Do Buy Japanese Yen $5-10 bil" as he participates in a Cabinet meeting at Camp David, Maryland, on July 31.
PHOTO: REUTERS
ASHEVILLE, North Carolina – US Treasury Secretary Scott Bessent said on Aug 30 that recent yen moves were “pretty well contained”, suggesting the Japanese currency’s renewed declines were not seen as the kind of disorderly moves that led to a rare joint Japan-US intervention in July.
The yen slid below the 160-per-dollar level on Aug 28, a threshold widely seen as increasing the likelihood of intervention, drawing market attention to whether the United States and Japan will step in to prop up the currency again.
The two countries carried out a rare joint yen-buying intervention on July 31, signalling their determination to prevent a sell-off in the yen and Japanese government bonds from spilling over into global markets.
When asked whether the central bank should consider consecutive interest rate hikes to combat the declines, Bessent said he expects Bank of Japan (BOJ) governor Kazuo Ueda to “do the right thing” on monetary policy with the backing of Prime Minister Sanae Takaichi.
“I’m not going to tell them what to do,” Bessent told Reuters, when asked whether the BOJ should hike rates more aggressively. “I’m going to say that I do think that we have probably reached the end of Abenomics, which was a reflationary programme.”
Launched in 2013 under the late prime minister Shinzo Abe, Abenomics was an economic policy aimed at breaking Japan out of prolonged deflation with a mix of massive monetary stimulus, big fiscal spending and steps to boost Japan’s growth potential.
Bessent said he plans to meet Ueda on the sidelines of the Group of 20 finance leaders’ two-day gathering in Asheville, North Carolina, that kicks off on Aug 31.
“I’ve known (Ueda) for 15 years. He’s a great economist. I think he’s under-rated in how savvy he is on markets,” Bessent said.
When asked whether the yen was still making disorderly moves, Bessent said: “Oh, no. I think it’s pretty well contained.” The remarks contrasted with his comments a month earlier, when he said the joint US-Japan intervention was aimed at countering “disorderly” moves in the currency.
The weak yen has become a headache for Japanese policymakers, pushing up import prices and driving broader inflation.
It has been blamed in part for the slow pace of BOJ rate hikes, which has kept Japan’s rate divergence with the US wide.
Bessent’s remarks on the BOJ came ahead of the central bank’s upcoming policy meeting on Sept 17 and 18.
Sources have told Reuters the BOJ is set to raise rates as soon as September and is considering hiking more aggressively thereafter than the current pace of roughly two times a year.
Bessent’s repeated calls in the past for the BOJ to raise rates have been among the factors that led markets to nearly fully price in the chance of a September hike, which would follow one in June.
Hiking in September, rather than October, could fuel market bets that the BOJ will start raising rates once every quarter, some analysts say.
Ueda in July said the BOJ will focus on mounting inflation risks and will not rule out speeding up the pace of rate increases if financial conditions were deemed too loose.
Such hawkish BOJ communication, however, has failed to put a sustained floor under the yen.
In the Reuters interview, Bessent said Japan has already “conquered” deflation and shifted to “Takaichi-nomics” under Takaichi, so the country can experience the benefits of past policies aimed at rejuvenating its economy.
Bessent said “Takaichi-nomics” is more shareholder-friendly, with substantial deregulation already implemented, especially in the workforce, meaning less government intervention.
“I think they should just sit back and enjoy the success of Abenomics and let that run,” Bessent said, when asked about his recommendations for Japan’s fiscal policy.
Known as a fan of Abenomics, Takaichi has laid out an ambitious spending programme to boost investment in growth areas and cushion the blow to households from rising living costs.
Critics say the expansionary fiscal approach contradicts the BOJ’s efforts to tame inflation with tighter monetary policy.
Takaichi’s big spending plans have also pushed the yield on the benchmark 10-year Japanese government bond to a three-decade high of 2.945 per cent earlier in August, as investors grew nervous about the country’s towering debt pile. REUTERS
