Washington pushes, Japan yields?
U.S. Treasury Secretary Scott Bessent again called for a rate hike in Japan, suggesting that BOJ Governor Kazuo Ueda will "do what is necessary".
According to Reuters, citing a conversation with Scott Bessent, Washington is pressuring Japan to tighten monetary policy.
"I believe he [Ueda – przyp.red.] is an excellent banker and if they give him freedom to act, I am convinced they will have excellent monetary policy," Bessent said in an interview with Reuters.
The U.S. official’s words are especially significant in the context of support from Japan’s Prime Minister Sanae Takaichi for maintaining a dovish monetary stance.
Bessent met with Ueda in Paris for the G7 meeting to discuss "Japan’s economic resilience and market outlook".
"I am convinced that Governor Ueda will successfully steer Japan’s monetary policy and I believe the fundamentals of the Japanese economy are strong, and excessive currency volatility is undesirable", he said.
Reuters believes Bessent’s call repeats his earlier remarks that the yen’s weakness can be addressed by raising rates.
"In October last year, Takaichi urged BOJ to raise rates. Two months later BOJ raised rates from 0,5% to 0,75%", it reported.
Mari Iwashita, chief monetary policy strategist at Nomura Securities, said, "Bessent likely presented his views on the Bank of Japan to Takaichi and Katayama during his visit to Tokyo last week, which increases the likelihood of a rate hike in June".
"The fact that Bessent stayed in Tokyo, and his recent remarks, indicate that Ueda has full Washington support on raising rates. Takaichi may agree to a hike if BOJ says it will help curb the yen’s decline," she added.
The Bank of Japan kept rates unchanged at 0,75% in its April 27‑28 meeting.
The next BOJ meeting is scheduled for June 15‑16.
Source: Trading Economics.
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Dollar to yen rate before the drop, the bank says
The dollar to yen rate on Wednesday, May 20 is at 159 JPY.
The ING Think forecast assumes the USD/JPY pair will not change direction for the next month. It will then fall to 158 JPY in three, 155 JPY in six, and 152 JPY in twelve months.
"A rate hike by the Bank of Japan to 1% in June, combined with a signal of further tightening, would be a supportive factor," analysts said.
"The USD/JPY rate will only start falling decisively once, when the dollar is ready to change trend, and such a scenario seems likely earliest in the second half of 2026," they added.
The Bank of Japan, like other central banks, will face a decision at an inopportune time amid growing concerns about the prolonged war in the Middle East, which could raise inflation in the coming months.
Chart. Dollar to yen rate — ING Think forecast
Source: ING Think.
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