Bessent: Yen Moves Seen as Contained, Not Disorderly, in Latest Policy Outlook
Analysis of Recent Yen Movements and Policy Responses
By David Lawder and Leika Kihara
Current Yen Movements and Market Reactions
ASHEVILLE, North Carolina, Aug 30 (Reuters) - U.S. Treasury Secretary Scott Bessent said recent yen moves were "pretty well contained," suggesting the Japanese currency's renewed slides were not seen as the kind of disorderly moves that led to a rare joint Japan-U.S. intervention last month.
The yen slid below the 160-per-dollar level on Friday, a threshold widely seen as increasing the likelihood of intervention, drawing market attention to whether the United States and Japan can step in to prop up the yen again.
Bessent's Perspective on BOJ Policy
In an interview with Reuters on Sunday, Bessent also said he expects Bank of Japan Governor Kazuo Ueda to "do the right thing" on monetary policy with the backing of Prime Minister Sanae Takaichi, when asked whether the central bank should consider consecutive interest rate hikes to combat yen declines.
"I'm not going to tell them what to do," Bessent said, when asked whether the BOJ should hike rates more aggressively. "I'm going to say that I do think that we probably reached the end of Abenomics, which was a reflationary program."
Background: Abenomics and Its Impact
Launched in 2013 under the late Prime Minister Shinzo Abe, Abenomics was an economic policy aimed at breaking Japan out of prolonged deflation with a mix of massive monetary stimulus, big fiscal spending and steps to boost Japan's growth potential.
Bessent said he plans to meet Ueda on the sidelines of the Group of 20 finance leaders' two-day gathering in Asheville, North Carolina, kicking off on Monday.
"I've known him for 15 years. He's a great economist. I think he's underrated in how savvy he is on markets," Bessent said on BOJ chief Ueda.
When asked whether the yen is still making disorderly moves, Bessent said: "Oh, no. I think it's pretty well contained."
Joint Intervention and Market Stability
Japan and the United States carried out a rare joint yen-buying intervention on July 31, signaling their determination to prevent a selloff in the yen and Japanese government bonds from spilling over into global markets.
Bessent's sanguine view on the yen contrasted with when, in confirming Washington's joint intervention with Tokyo a month ago, he described the action as aimed at countering "disorderly" moves in the currency.
Shift to 'Takaichi-nomics' and Future Outlook
Policy Shifts and Economic Implications
SHIFT TO 'TAKAICHI-NOMICS'
A weak yen has become a headache for Japanese policymakers by pushing up import prices and broader inflation. It has been blamed in part on the slow pace of BOJ rate hikes, which has kept Japan's rate divergence with the United States wide.
Bessent's remarks on the BOJ came ahead of its closely-watched policy meeting on September 17 and 18. Sources have told Reuters the BOJ is set to raise the rate as soon as September and is considering hiking more aggressively thereafter than the current pace of roughly two times a year.
His past repeated calls for BOJ rate hikes have been among factors that led markets to nearly fully price in the chance of a September hike, which would follow one in June.
Hiking in September, rather than October, could fuel market bets the BOJ will raise rates once every quarter, rather than the current speed of roughly twice a year, some analysts say.
Ueda last month said the BOJ will focus on mounting inflation risks and won't rule out speeding up the pace of rate increases if financial conditions were deemed too loose.
Such hawkish BOJ communication, however, has failed to put a sustained floor under the yen.
Transition from Abenomics to Takaichi-nomics
In the Reuters interview, Bessent said Japan has already "conquered" deflation and shifted to "Takaichi-nomics" under Prime Minister Sanae Takaichi, so Japan can experience the benefits of past policies aimed at rejuvenating its economy.
Bessent said "Takaichi-nomics" is more shareholder-friendly with substantial deregulation made especially in the workforce, which means less government intervention.
"I think they should just sit back and enjoy the success of Abenomics and let that run," Bessent said on recommendations he had on Japan's fiscal policy.
Critiques and Risks of Expansionary Fiscal Policy
Known as a fan of Abenomics, Takaichi has laid out an ambitious spending programme to boost investment in growth areas and cushion the blow to households from rising living costs.
Critics say the expansionary fiscal approach contradicts the BOJ's efforts to tame inflation with tighter monetary policy.
Takaichi's big spending plans have also pushed the yield on the benchmark 10-year Japanese government bond to a three-decade high of 2.945% earlier this month, as investors grew nervous about the country's towering debt pile.
(Reporting by David Lawder and Leika Kihara; Editing by Will Dunham and Sam Holmes)
