EXCLUSIVE-Bessent says BOJ's Ueda can deliver if Tokyo grants freedom on rates

U.S. Treasury Secretary Scott Bessent said on Tuesday ‌he ​was confident that Bank of Japan Governor Kazuo Ueda would do "what he needs to do" if granted sufficient independence by Japan's government, signalling Washington's desire for further rate hikes by the central bank. "I think he's an excellent central banker, and ‌if they will give him the room to do what he will do, needs to do, I am confident that they will have great monetary policy," Bessent told Reuters in an exclusive interview.

The remarks reaffirm Bessent's long-standing confidence in Ueda while signalling that the success of Japan's monetary strategy will hinge in part on Prime Minister Sanae Takaichi's administration allowing ‌the central bank freedom over interest rate decisions. It also suggests that Washington is nudging Japan on the need to allow for policy tightening as needed, particularly given Takaichi's ‌long-standing preference for loose monetary policy and her past resistance to BOJ tightening. In a post on X on Tuesday, Bessent said he had met Ueda on the sidelines of a Group of Seven finance chiefs' meeting in Paris to discuss Japan's economy and market outlook, adding: "I am confident that Governor Ueda will successfully guide Japan's monetary policy."

"ENTIRELY REASONABLE" Asked about Bessent's remarks from the interview, Ueda said at a press ⁠conference on ​the G7 meeting that it "ultimately comes down to ⁠striving to conduct appropriate monetary policy with the aim of achieving our 2% inflation target in a sustained and stable manner."

In the same press conference, Finance Minister Satsuki Katayama stressed that the government has ⁠consistently respected the relationship defined by the BOJ law. "Prime Minister Takaichi of course shares this view, and she has said the government expects the BOJ to conduct policy appropriately along those lines. ​So if that's the context, I think he is saying something entirely reasonable," she said.

Bessent met Takaichi and Katayama during a visit to Tokyo earlier last ⁠week. Bessent and Katayama said separately that they had reaffirmed close coordination on exchange-rate developments, though they offered few details on their discussions related to monetary policy. The BOJ kept interest rates steady last month, but dropped strong ⁠signals ​about the chance of a hike as soon as June due to growing concern that higher energy costs resulting from the Middle East war could push up inflation.

The benchmark 10-year Japanese government bond yield touched 2.8% this week, a level last seen in October 1996. At Tuesday's press conference, Ueda said that long-term interest rates have been ⁠rising recently "at a relatively fast pace," citing market views that heightened inflation concerns, Japan's economic outlook, monetary and fiscal policy are among factors impacting the bond market. "We will ⁠monitor the government bond market situation closely while ⁠maintaining close coordination with the government," he said.

As growing inflation, coupled with the BOJ's slow pace of rate hikes, has been pushing down the yen close to the psychologically important 160-per-dollar line, Katayama reiterated a warning against foreign exchange volatility. "Our stance has ‌been that we would ‌take decisive action when necessary," she said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)