Katayama says she had no talks on Japan rate hikes with Bessent

Japanese Finance Minister Satsuki Katayama stated that she had no discussions with US Treasury Secretary Scott Bessent about raising interest rates, despite Bessent publicly expressing expectations of Tokyo's intervention to strengthen the Japanese currency. This assertion came after Katayama met with Bessent at the G20 finance meeting in North Carolina, marking their first in-person meeting since the historic joint intervention in July aimed at supporting the struggling yen.

Katayama emphasized that the Bank of Japan is solely responsible for determining monetary policy in Japan, stressing the importance of a stable yen for the stability of global financial markets, including the US. When inquired about Bessent's call for Japanese rate hikes, Katayama reiterated that no such conversation took place and reaffirmed the BoJ's exclusive authority over monetary policy decisions.

Bessent, speaking on CNBC, acknowledged that he could not influence the natural market equilibrium and stated that he had information suggesting a stronger yen would be supported. He expressed confidence that the Japanese government and the BoJ would take measures to bolster the currency, a belief reinforced by investors increasing their anticipation of a possible BoJ rate hike in September following the US-Japan intervention.

This anticipation was evident in the recent rise of the 10-year Japanese government bond yield to 3%, the highest level since 1996, driven by concerns over Japan's fiscal situation and the lingering effects of the joint intervention, as noted by Takahide Kiuchi, a former central banker and economist at Nomura Research Institute.

Kiuchi explained that a potential rate hike in Japan would primarily target inflation but also reflect a response to US requests.