The Japanese yen jumped against the dollar and Bitcoin after the U.S. Treasury Secretary Scott Bessent commented on Japan’s inflation problem and rate cut policy.
“The Japanese have an inflation problem. They are behind the curve, so they are going to be hiking, and they need to get their inflation problem under control,” Bessent said in an interview with Bloomberg.
His remarks pushed the yen higher, with USD/JPY falling 0.5% to 146.72, leading gains in Asian currencies. Tokyo stocks, however, slipped on Thursday, ending a two-day record rally.
BOJ Keeps Rates Steady Amid Inflation Concerns
Despite Bessent’s hawkish view, Bank of Japan (BOJ) Governor Kazuo Ueda has a differing view on this, arguing that there is no rush to raise rates. Ueda notes that the core inflation, driven by domestic demand and wages, is still below the 2% target, even if the headline rate tops 3%. In July, the BOJ kept its key rate at 0.5% and offered no hints about what’s next.
Analysts say that Japan’s gradual rate increases have kept the yen weak, raising import costs and fueling inflation. The BOJ will review rates in September and October, with markets watching for potential hikes.
The Trump administration has also been pushing for Japan to raise interest rates, strengthen the yen, and narrow its rate gap with the U.S. Back in June, the Treasury had urged the BOJ to focus on growth, inflation, and fixing the yen’s weakness.
Dollar Slides, Bitcoin Hits Record High
The U.S. dollar has dropped to multi-week lows as traders bet heavily on the Fed cutting rates on September 17. There are also slight chances of a larger 50-basis-point move. Bitcoin has been rallying and just hit a new all-time high of over $124k, fueled by optimism around September fed rate cuts and institutional buying.
Turning attention to the US, the situation is equally complex, with the Federal Reserve under pressure.
Bessent Backs 50bps Rate Cut
There is immense political pressure on the Fed to ease the interest rates as Trump has repeatedly blasted Fed Chair Jerome Powell for moving too slowly. Bessent has also hinted at a series of cuts, starting with a possible half-point move.
“I do think we could go into a series of rate cuts here, starting with a 50 basis point rate cut in September,” he said. “We should probably be 150, 175 basis points lower,” he said in the interview.
Rate cut odds have now climbed over 99% as per data from the CME FedWatch Tool. Goldman Sachs predicts three 25-basis-point cuts this year and two more in 2026.
On Tuesday, U.S. data showed July inflation at 2.7%, below expectations. This eased concerns that Trump’s tariffs were driving prices higher and strengthened expectations for rate cuts.
Investors are now watching U.S. inflation and retail sales numbers for clues on the economy.
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FAQs
The yen rose 0.5% vs USD after U.S. Treasury comments on Japan’s “behind-the-curve” inflation, fueling expectations of BOJ rate hikes.
BOJ kept rates at 0.5% but may hike in September/October if inflation persists, despite Governor Ueda’s cautious stance on weak domestic demand.
A stronger yen would ease Japan’s import-fueled inflation and reduce the U.S.-Japan rate gap, aligning with Trump’s economic agenda.
