Bessent says BOJ is falling behind the curve, expects rate hike
US TREASURY Secretary Scott Bessent said the Bank of Japan is falling behind the curve in addressing inflation, in a rare comment admonishing policy decisions by a foreign central bank.
“They’re behind the curve,” Bessent told Bloomberg TV on Wednesday, noting that he discussed Japan’s inflation problem with BOJ Governor Kazuo Ueda. “So they’re going to be hiking and they need to get their inflation problem under control,” he added.
Bessent’s comments come as the BOJ continues to have one of the lowest policy rates among major economies while the nation’s key price gauge has remained at or above the bank’s 2 per cent target for more than three years.
Following the BOJ’s decision to keep rates on hold last month, Ueda delivered a largely dovish message and avoided committing to a timeline for the next hike.
In the latest Bloomberg survey of economists watching the BOJ, around 42 per cent of respondents said they expected a rate hike in October, with a third expecting a move in January. The BOJ is expected to stand pat when it next sets policy on Sept 19.
Bessent has in the past spoken approvingly of BOJ rate hikes, characterising such moves as consistent with economic fundamentals. As a result of stronger domestic data “the Bank of Japan is raising rates, so all that’s natural,” he said in April.
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In its latest quarterly economic outlook, the central bank raised its median inflation forecast for the current fiscal year to 2.7 per cent from 2.2 per cent, citing persistent increases in food prices.
Projections for fiscal years 2026 and 2027 were also revised upward, suggesting the BOJ is gradually approaching its goal of achieving stable inflation.
Bessent also said that US bond yields have been affected by trends abroad, including in Japan and Germany. Yields on Japan’s super-long bonds have surged to the highest levels in decades in recent months, with various auctions showing acutely weak demand.
“This is a global phenomenon,” said Bessent, although he noted that the US 10-year yield is one of the few that are down this year. “That tells me that there’s credibility from Treasury, credibility from the Fed that the inflation expectations are well anchored, but there is definitely ‘leakage.”’ BLOOMBERG
