loading
loading
(Bloomberg Opinion) -- Treasury Secretary Scott Bessent describes himself as the top US bond salesman. He's rapidly becoming the top Japan salesman, as well. Not only does he profess to know what that country's central bank will do, he insists that anyone wanting to bet against a sustained yen rally should try him. Bravado aside, he is on to something. The Bank of Japan, widely expected to raise interest rates this week, is a critical player in determining the yen's trajectory. But, absent a surprise on Friday, when the authority announces its decision, it may not be the most decisive factor. What's key is the message that American muscle stands behind the yen — that Japan is not alone, for now. The yen is enjoying a notable rally, encouraged by Bessent’s move in late July to join Tokyo in a rare intervention in the foreign-exchange market. Last week, it neared 152 to the dollar, the strongest since February. The currency certainly has room to appreciate; it had dropped to the weakest in decades, to almost 164 in July, and solo efforts by Japan to stem the retreat had negligible effect. Bessent has positioned himself as a vital player in this maneuvering. But he has also left himself open to shouldering at least part of the blame when the rally stalls. With the yen up by around 4% this month alone, further gains will likely be more modest. There's little diplomacy in his language, despite the bilateral nature of the endeavor. “I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do,” Bessent said last week. “You can bet against me if you want.” He must know that no trade is risk free, even if it goes the way he and his counterpart, Finance Minister Satsuki Katayama, desire. The FX market is massive, with daily turnover of $9.6 trillion. Not even the mightiest official can fight that for very long. One of the main tasks of intervention, according to Robert Rubin, who sat in Bessent's chair during the Clinton years, is to shift psychology. So how important is the BOJ decision? A 25-basis-point hike is now nailed on. Six weeks ago, Governor Kazuo Ueda flubbed an attempt to signal a more hawkish stance with tweaked guidance pointing to the upside risks to prices, but couched it in such language that few seemed to immediately understand it. But things have changed. While the common view appears to be that America is strongarming a cautious BOJ, don’t be so sure. We have long argued that what was needed to strengthen the yen was not a narrowing of the yield gap with the US (that happened a long time ago), but a change in the narrative: The yen consistently weakened because it was expected to, and explanations like Prime Minister Sanae Takaichi’s supposedly irresponsible spending plans were always post-facto. Bessent has seized the narrative — and he is a far better communicator than anyone in Japan. His hints have spooked yen bears. Instead of having to signal more rate increases, Ueda may merely need to play along with a hawkish hint. Markets will now be primed for this, instead of having to search for it. (One minor irony: It’s interesting that complaints about Takaichi’s alleged interference in BOJ autonomy don’t seem to be matched by grumbles about Bessent’s.) And US involvement has focused market attention on other developments that bring money to Japan, too. The powerful Government Pension Investment Fund seems almost certain to increase its exposure to domestic bonds and indeed may already be doing so; Norway’s sovereign wealth fund has already announced plans to increase its allocation to Japanese bonds. The risk is what happens from here: The Takaichi government fears an overly weak yen, but likes it just fine at around 150. That does not appear to be Bessent’s stance. As for Ueda, he doesn’t have many hikes left before Japan reaches the neutral rate, believed to be around 1.5% or 1.75%. The economy has so far proven to be far more resilient to higher rates than many, ourselves included, had guessed. Past incremental rate hikes were disastrous, but rates at 1% are nonetheless still accommodative. While Bessent was full of praise for the Japanese economy at the recent G20 meeting — he noted that while “in 2011, Japan was written off as dead, now I think it’s one of the most vibrant economies in the world” — it’s not doing so well that it needs it needs rates high enough to curb activity. Bessent might be too confident. Rubin, who like Bessent made a fortune in finance before entering public service, liked to say that no outcome in trading is certain. It's a game of probability, and you can help shape the outcome by being firm. Rubin, for example, almost never altered his language on the strong dollar, even when coming to the aid of allies meant selling a few greenbacks. Underlying fundamentals will have the last say. Bessent and Katayama have, at least, made Japan pessimists think twice. That’s no small thing.More From Bloomberg Opinion: This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News. Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously led the breaking news team in North Asia, and was the Tokyo deputy bureau chief. More stories like this are available on bloomberg.com/opinion ©2026 Bloomberg L.P. Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
document fetched 2026-09-14 02:48 · canonical https://livemint.com/market/bessent-doubles-down-on-house-of-the-rising-sun-11789324052601.html