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Bessent declines to advise Bank of Japan on rate increases
The US Treasury Secretary stepped back from his hawkish stance on Japanese monetary policy, saying he trusts BoJ Governor Ueda's judgment
US Treasury Secretary Scott Bessent, who had been vocally advocating for tighter Japanese monetary policy, refrained from offering direct advice when asked point-blank whether the Bank of Japan should raise rates again.
During an NHK interview in early August, Bessent said he would not advise BoJ Governor Kazuo Ueda on whether to pursue back-to-back rate increases. He cited respect for the central bank’s independence and expressed confidence in Ueda’s ability to navigate Japan’s economic landscape.
From megaphone to microphone off
From roughly October 2025 through mid-2026, Bessent repeatedly urged the Japanese government to let the BoJ operate with greater autonomy, a not-so-subtle way of saying “let them raise rates.”
The BoJ hiked its policy rate to 0.75% in December 2025 and has since moved it up to 1%. Market participants have been speculating about further increases in September or October 2026, which made the NHK interviewer’s question about back-to-back hikes particularly timely.
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The yen, the intervention, and the politics
US and Japanese officials conducted a joint currency intervention around July 31 to August 1, 2026, a rare coordinated move aimed at propping up the yen.
Prime Minister Sanae Takaichi has historically favored looser monetary policy, putting her at odds with Bessent’s hawkish preferences. The result is a policy triangle: the US Treasury Secretary wants higher Japanese rates, the Japanese prime minister prefers lower ones, and the BoJ governor sits in the middle trying to make decisions based on economic data while two powerful politicians send conflicting signals.
What traders are watching
The BoJ’s policy rate sitting at 1% is already historically significant for Japan, a country that spent decades in negative or near-zero territory. Upcoming BoJ meetings in September and October 2026 will serve as critical inflection points. If the central bank does proceed with additional hikes, it would suggest that Ueda is moving in the direction Bessent has long advocated. If the BoJ holds, it could signal that domestic political pressure from Takaichi’s camp is winning the tug-of-war.