Yen: Japan says no rate-hike talks with Bessent

Japanese Finance Minister Satsuki Katayama said she did not discuss interest-rate increases with US Treasury Secretary Scott Bessent after meeting him on the sidelines of the G20 finance meeting in North Carolina.

Katayama spoke after Bessent publicly said he expected Tokyo and the Bank of Japan to take steps that would support the yen. The meeting was their first face-to-face since a July joint intervention by the United States and Japan to prop up the Japanese currency.

Katayama told reporters on Monday that the two sides confirmed an orderly yen market was “indispensable” for global financial stability, including in the United States, and that coordinated Japan-US efforts contributed to that goal.

Asked whether Bessent had called for Japanese rate hikes, Katayama said “there was no such discussion” and stressed that monetary policy is left to the Bank of Japan.

Bessent told CNBC that he expected Japan to act to support the yen. He said it was his belief that the Japanese government and the Bank of Japan would “do the things that will lead to a stronger yen”. Asked whether he meant rate hikes, he said: “I think the market's pricing that in now.”

The yen hit 163.99 per dollar before the July intervention, its weakest level since 1986. It strengthened to 155.23 by early August but was around 159.80 in the latest level given.

Since the intervention, investors have increased bets on a Bank of Japan rate increase in September. On Tuesday, the benchmark 10-year Japanese government bond yield rose to 3.0%, its highest level since 1996.

Takahide Kiuchi, a former central banker and executive economist at Nomura Research Institute, said the yield rise was fuelled by worries over Japan's fiscal health after an expansive budget, as well as expectations for rate hikes in Japan and the United States. Kiuchi said a Japanese rate increase would largely be aimed at rising inflation, though several also believed it would respond to US requests.