U.S. Backs Japan in Stabilizing Yen, Expects BOJ Steps: Bessent

Washington, Aug. 4 (Jiji Press)–U.S. Treasury Secretary Scott Bessent said Tuesday that Washington will help Japan stabilize the yen, and that he believes the Bank of Japan will take necessary measures, including a possible interest rate hike. “I’m not going to prejudge what the BOJ should do, (but) I’ve known (BOJ) Governor (Kazuo) Ueda for 15 years, and I believe that he will do what is needed,” Bessent said in an interview on U.S. broadcaster CNBC, after Japanese and U.S. authorities conducted their first concerted yen-buying foreign exchange market intervention in roughly 28 years on Friday. The BOJ last conducted an interest rate hike in June, raising its target for the unsecured overnight call rate, Japan’s benchmark short-term interbank lending rate, to around 1 pct from around 0.75 pct. The treasury secretary said that he has an “extremely good working relationship” with his Japanese counterpart, Finance Minister Satsuki Katayama, and that Tokyo is “making serious efforts to stem the substantial undervaluation” of the yen. “A stable yen is not only important for the U.S., but very important for the entire region,” Bessent continued. He said that the Japanese currency’s depreciation may have ramifications for other currencies, noting, “We’ve seen excess volatility in the (South) Korean won.” Late last month, U.S. authorities conducted a rate check with financial institutions, seen as a precursor to intervention, for the first time since January, before carrying out the coordinated market action with Japan. “The U.S. decided to join (the intervention) because we are very optimistic on their policy path,” Bessent said, voicing support for Japanese Prime Minister Sanae Takaichi’s policies. Bessent said that the U.S. Federal Reserve’s Foreign and International Monetary Authorities Repo Facility, which provides temporary dollar liquidity to foreign authorities, is aimed at protecting the U.S. economy and mitigating market volatility. Tokyo plans to use the scheme to secure sufficient dollar funds for possible future yen-buying interventions without selling its holdings of U.S. Treasury bonds, a move expected to help prevent a spike in U.S. interest rates. Meanwhile, Japanese market sources said Tuesday that Japanese authorities may have bought a relatively small quantity of yen in the market on Monday, marking the third straight business day of yen-buying market intervention. The purchase amount is estimated at about 1 trillion yen. The projection is based on BOJ data on estimated changes in commercial financial institutions’ current account deposits at the central bank, which reflect movements of funds used in market intervention. However, it is possible that the bank did not conduct an intervention Monday, as the projected size of the operation could be within the error of estimation. END [Copyright The Jiji Press, Ltd.]