Bessent Pressure and 30-Year Bond Yield High Lock BOJ Into September Rate Hike

US Treasury Secretary Scott Bessent has effectively removed any remaining ambiguity around a Bank of Japan rate increase in September, telling BOJ Governor Kazuo Ueda directly that the country's next step should be to raise interest rates and publicly expressing hope that Ueda would "do the right thing" on monetary policy. The comments, made during meetings on the sidelines of the G20 gathering of finance ministers and central bank governors, followed Bessent's separate talks with Japanese Finance Minister Satsuki Katayama. A US Treasury official confirmed to Japanese public broadcaster NHK that Bessent had pushed for rate hikes in those meetings.

The remarks landed as Japan's benchmark bond yield climbed to 3% for the first time since 1996, a milestone that itself reflects the market's growing conviction that the BOJ's long era of ultra-loose policy is ending. The dollar slipped toward 159.73 yen as BOJ rate hike bets intensified, with USD/JPY under pressure following Bessent's signal. Japan's Chief Cabinet Secretary Kihara offered a measured response, saying interest rates are set by markets based on various factors, while Finance Minister Katayama played down reports that Bessent was directly pushing the BOJ, saying the two sides share a view that recent joint currency intervention was beneficial.

The BOJ had already been widely expected to raise rates at its September meeting given building inflation pressures and hawkish signals from within the central bank. Bessent's intervention, analysts say, goes further than endorsing a single hike: it puts pressure on the BOJ to accelerate the pace of increases going forward, tying the institution's credibility to a more sustained tightening path.