Bessent and Takaichi Sanae Diverge on BOJ Rate Hike Stance
Nashnova编辑部
The U.S. and Japan mounted their first joint yen intervention since 1998, but Treasury Secretary Bessent wants the BOJ to hike while PM Takaichi fears hiking too fast — that rift is already undercutting the intervention's staying power.
Joint yen intervention — why didn't the effect last?
Last month the U.S. and Japan jointly bought yen — the first coordinated intervention since 1998.
The yen briefly rallied to around 155, then quickly retreated and is now pushing back toward the 160 psychological level.
BNP Paribas Asset Management portfolio manager Peter Vassallo called the BOJ's decision to stand pat on the same day a "missed golden opportunity."
This means → buying yen alone bought time, but without a rate hike to back it up, the exchange rate snapped right back.
What exactly are Bessent and Takaichi arguing about?
Bessent has long argued the BOJ should tighten monetary policy (i.e. raise rates and pull back liquidity) to address yen weakness, publicly calling the BOJ "behind the curve."
Takaichi worries that hiking too fast could kill the economic recovery — the BOJ has raised rates twice since she took office last October, yet the benchmark rate sits at just 1%.
In plain terms = one says "hike now," the other says "not too hard" — they disagree fundamentally on how aggressively to use the same tool.
Why is Takaichi so wary of rate hikes?
She is deeply influenced by her mentor, Shinzo Abe. Abe later regretted endorsing a BOJ rate hike in 2006 just as recovery signs appeared — growth stalled within months, and Abe himself resigned a year into his term.
Bloomberg Economics' Taro Kimura noted that "that history profoundly shaped Takaichi's view of the BOJ."
This reflects a lived lesson in Japan's own history: hike at the wrong moment and the recovery dies.
What happens if the BOJ doesn't hike?
RBC Global Asset Management CIO of fixed income Mark Dowding warned: if the BOJ holds off and the yen keeps falling, "the intervention will be seen as a failure."
He noted Takaichi faces a dilemma: she wants easy policy to boost growth, but a weaker yen pushes up inflation, which erodes her approval ratings instead.
This means → no hike → yen slides further → prices rise → voters grow unhappy. Staying loose carries its own political cost.
What is the market betting on?
Markets currently expect the BOJ to hike again in September or October.
The last time Japan hiked three times within 12 months was 1989, at the peak of the economic bubble.
Cabinet members have repeatedly affirmed BOJ independence — economy minister Minoru Kiuchi said this week, "We respect the central bank's independence."
In plain terms = the government says hands-off, the market bets a hike is coming — the September or October policy meeting is the make-or-break test for whether the intervention can truly shift expectations.
Content is for reference only, not financial advice.