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US Treasury Secretary Scott Bessent has said that the Japanese central bank “behind the Curve” falls on inflation and will probably have to increase interest rates, in a rare wipe by a senior official in the monetary policy of another country.
“The Japanese have an inflation problem … they are behind the curve, so they go for a walk and they have to get their inflation problem under control,” Bessent told Bloomberg TV, comments that were in contrast to the position of Governor Kazuo Ueda from Bank of Japan.
The comments from Bessent on Wednesday reflected the concern about the rising of long -term returns, which he suggested that they were hit by those in Germany and Japan. He also said he had spoken to Ueda about the issue.
De BoJ kept rates at 0.5 percent during his meeting at the end of July and gave no indication of the timing of a future elevation, even when the Japanese central bank increased its inflation forecasts.
After the decision in July, Ueda said that he did not believe that the central bank was ‘behind the curve’ at rates. “At the moment we see that risk being not very high,” he said.
The core inflation measurement of the BoJ has surpassed the objective of the central bank for more than three years, the most recently fascinated by rising food costs, but UEDA waited for continuous wage growth before increasing the rates again, according to economists.
The US consistently insisted on the Boj to tighten the policy. In a report from June to the Congress, the American treasury said that the Japanese Central Bank “should continue in response to domestic economic foundations, including growth and inflation, in support of a standardization of the weakness of the dollar and a much -needed structural rebalis of bilateral trade”.
The comments from Bessent reflect “A common criticism that goes according to the nature of inflation and what the BoJ wants to see. Ueda wants to see evidence of domestic wage growth, demand -driven inflation before he continues,” said Stefan Ancurick, Japan Economist at Moody’s Analytics. Ueda “could push higher, but not at the levels that people like Bessent want to see,” he added.
Angrick noted that Japanese wage growth has been between 2 and 3 percent based on the head of the population, with the inflation, of which he said it has “on average between 3 and 4 percent” since the middle of 2022.
“The boj awaits until it turns, on inflation to stabilize and let grow.”
De Boj refused to comment on Bessent’s statements.
After the comments from Bessent, the Swaps of the Night Index indicated a slightly higher chance of a speed rise at the next meeting of BoJ in September, showing a 7 percent chance of an increase of 0.25 percentage point, an increase of around 5 percent.
Traders and economists expect the BoJ to hold on next month, but bets on a rate increase in October or January will increase. Traders are increasingly praising a 0.25 percentage point that was reduced by the Federal Reserve in September, in the midst of increasing calls from President Donald Trump for the US Central Bank to aggressively lower rates.
The yields on Japanese government bonds were on Thursday, with the 10-year-old JGB returns rising by 0.04 percentage points to 1.55 percent. Bond yields go reversed to prices. The Yen strengthened 0.7 percent to ¥ 146.4 per dollar on Thursday. The benchmark -topix of Japan fell by 1 percent during the morning trade after hitting a record high in the previous day.
The “fast and coherent” market response between activa classes on Berrets’ comments shows that “expectations come together on a narrowing of the US-Japan short-term rate difference,” said Shoki Omori, Chief rates and Mizuho.
Bessent also called on the US central bank to reduce the rates by 0.5 percentage points next month, and suggested that the loan interest of the US should be no less than 1.5 -1.75 percentage points lower.
A weak job report this month and a relatively benign inflation lecture on Tuesday has fueled further expectations of a FED rate reduction.
“The point that makes berry about global correlation and bond returns is fair, but the reality is that it is the US that sets the tone,” said Angrick.
