By Leika Kihara
TOKYO (Reuters) -U.S. Treasury Secretary Scott Bessent urged Japan’s government on Wednesday to give the central bank scope to raise interest rates, escalating his warning to Tokyo against keeping the yen too weak through prolonged low borrowing costs.
The dollar fell 0.3% to 151.59 yen after the comments, which revived market expectations of a near-term interest rate hike by the Bank of Japan.
“I am encouraged by her deep understanding of how Abenomics has moved from a purely reflationary policy to a program that must balance growth and inflationary concerns for the citizens of Japan,” Bessent wrote about his meeting with Japanese Finance Minister Satsuki Katayama on Monday.
“The government’s willingness to allow the Bank of Japan policy space will be key to anchoring inflation expectations and avoiding excess exchange rate volatility,” he added.
The comments come ahead of the BOJ’s two-day policy meeting ending on Thursday, when markets widely expect the central bank to hold off on raising interest rates.
They also followed a statement by Bessent on Tuesday, which said he called for a “sound monetary policy” in Japan to anchor inflation expectations during his meeting with Katayama.
Bessent’s comments add to complications for the administration of new Prime Minister Sanae Takaichi, who is known as an advocate of expansionary fiscal and monetary policy.
In overseeing Washington’s trade and exchange-rate talks with Tokyo, Bessent has repeatedly signalled his preference for tighter Japanese monetary policy.
Some analysts see Washington pursuing a weak-dollar policy that would boost U.S. exports, thereby applying pressure on Japan to allow the yen to appreciate against the dollar.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Muralikumar Anantharaman)
