Bessent Urges Japan to Clearly Present Fiscal Sustainability and Rate Hikes to Markets

US Treasury Secretary Scott Bessent met consecutively with Bank of Japan Governor Kazuo Ueda and Japanese Finance Minister Satsuki Katayama, emphasizing the sustainability of Japan's fiscal policy and the need for clear communication regarding interest rate hikes, NHK reported on the 1st.

Erin Brown, US Treasury Deputy Under Secretary for International Affairs, said in an interview with NHK that Secretary Bessent held separate talks with BOJ Governor Ueda on August 30 and Finance Minister Katayama on August 31.

The officials are attending the Group of 20 (G20) Finance Ministers and Central Bank Governors Meeting held in Asheville, North Carolina.

Bessent reportedly told both Governor Ueda and Finance Minister Katayama that "as a next step, it is important to clearly present the path toward fiscal sustainability and interest rate hikes to the market."

The "next step" he referred to appears to be measures following the large-scale joint yen-buying market intervention by the US and Japanese governments at the end of July.

At the time of the bilateral joint currency intervention, the yen had hit a 40-year low at around 164 yen per dollar, before strengthening to the 155 yen range following the market intervention.

However, the effect of the market intervention is evaluated to have faded as the yen briefly climbed back into the 160-yen range, reaching 160.20 yen at one point in the New York foreign exchange market on the 28th (local time).

Regarding the outlook, Deputy Under Secretary Brown stated, "At this point, intervention has its limits. Moving forward, policies are what matter," urging the Japanese government to take action to stabilize the yen's exchange rate.

Finance Minister Katayama also confirmed her meeting with Secretary Bessent, according to Kyodo News.

She stated, "We confirmed that an orderly yen exchange rate is essential for the stability of global financial markets, and that sustained and coordinated efforts by the US and Japan contribute to this common objective."

Katayama also stated that she would lower the ratio of debt outstanding to gross domestic product (GDP) to "achieve both a strong economy and fiscal sustainability."

However, the Japanese government's budget request for next year is projected to reach 143 trillion yen (approximately 1,224.3 trillion won), marking a record high for the fourth consecutive year.

Coupled with Japan's expansionary fiscal stance, the fallout from rising US long-term interest rates driven by expectations of rising US crude oil futures prices and mounting inflationary pressures led to a dominance of selling in Japanese government bonds, continuing the rise in yields.

In the Japanese government bond market on the 1st, the yield on 10-year bonds briefly touched 2.990% in the morning, bringing it to the brink of entering the 3% range.

This marks the highest level in about 30 years since 1996.

Meanwhile, NHK reported that Secretary Bessent and Japanese Finance Minister Katayama also discussed economic sanctions against Iran.

Deputy Under Secretary Brown said, "Secretary Bessent emphasized that it is vital for all countries to cooperate in the economic isolation strategy to cut Iran off from the global financial network, and secured Japan's support to sever any financial touchpoints with Iran."

(Photo: AP, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.