Bézard presses, raising market expectations for a rate hike by the Bank of Japan

The public pressure campaign led by U.S. Treasury Secretary Bessent to push up the yen has heightened market expectations for the Bank of Japan to take a round of monetary tightening unseen in over a generation, raising the risk of market turmoil if policymakers fail to deliver. In an unusual act of verbal market intervention, the U.S. Treasury Secretary on Tuesday boasted of having "asymmetric information" regarding the Bank of Japan's next steps and referred to himself as the “market maker.” Speaking at an event at Southern Methodist University in Texas, the former hedge fund trader did not limit his remarks to the central bank, claiming he knew the general plans of "Japanese policymakers" as a whole. Bessent did not specify what he wanted, but just last week he publicly called on Japanese officials to "do the right thing" regarding interest rates. The market has already priced in a 25 basis point rate hike next week, with mounting pressure on Governor Ueda to deliver a sufficiently strong forward-looking tightening message at the meeting to avoid disappointing markets and erasing the yen’s recent gains. Bessent's comments highlight his unusually active involvement in Japan's economic policy formation; Japan is the largest foreign holder of U.S. debt. At the end of July, he coordinated with Japan's finance minister for the first joint intervention to support the yen since 1998.