Yen Extends Gains Amid Bessent Warning

The Japanese yen appreciated toward 153 per dollar on Wednesday, holding near its strongest level in almost seven months after US Treasury Secretary Scott Bessent warned traders on betting against the currency. The former hedge fund manager said he has “pretty good insight” on what the Bank of Japan will do when he is making a call and intervening with the yen. The BOJ is broadly expected to raise interest rates next week, while the Takaichi administration has adopted a more hawkish stance as policymakers acknowledge the need to limit excessive yen weakness. The currency is also reversing the bearish forces that drove it to a 40-year low in July, including an unwinding of carry trades and expectations of increased capital repatriation. Meanwhile, private-sector data showed Japanese manufacturers’ sentiment improved for a second consecutive month in September, helped by resilient demand for semiconductors and data centers.

The Japanese yen strengthened toward 153 per dollar on Tuesday, reaching its strongest level since February and reversing the bearish forces that pushed the currency to a 40-year low in July. The rally was driven by the unwinding of carry trades, expectations of capital repatriation and growing US political pressure for Japan to support the yen through tighter monetary policy. Markets now expect the Bank of Japan to raise interest rates this month, with an economic adviser to Prime Minister Sanae Takaichi saying the central bank is likely to hike rates in September and deliver another increase by January next year. The remarks highlight growing recognition within the Takaichi administration, which has previously favored a dovish approach, that further BOJ tightening may be necessary to curb excessive yen weakness. Meanwhile, data showed Japanese wages rose at their fastest pace since 1997, strengthening expectations for a more hawkish BOJ policy stance.

The Japanese yen traded around 156 per dollar on Monday after gaining more than 2% last week, supported by growing expectations that the Bank of Japan will raise interest rates this month. Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, said the central bank is likely to hike rates in September and deliver another increase by January next year. The comments point to a widening recognition within the Takaichi administration, which has previously taken a dovish stance, that additional BOJ hikes may be needed to stem excessive yen weakness. The currency also benefited from the unwinding of carry trades, expectations for capital repatriation and increasing political pressure from the US. Meanwhile, data showed Japan’s foreign exchange reserves dropped by a record $79.6 billion in August following Tokyo’s largest-ever yen-buying intervention, with authorities spending about $99 billion between July 30 and August 26 to contain persistent weakness in the currency.