Scott Bessent warns yen traders as BOJ rate hike bets intensify

Bessent challenges traders betting against the yen

US Treasury Secretary Scott Bessent has issued a blunt warning to currency traders as the yen extends its recovery and expectations for another Bank of Japan interest-rate increase gain momentum.

“I am the house now,” Bessent said during an event in Texas, arguing that his coordination with Japanese officials gives him valuable insight into the decisions likely to be taken by the Bank of Japan and Japan’s government.

His remarks represent a clear attempt to discourage traders from rebuilding short-yen positions. They also show how closely Washington has become involved in Japan’s efforts to stabilise its currency following its slide to a four-decade low.

US authorities joined Japan in purchasing yen on July 31, marking the first American intervention in support of the Japanese currency in three decades.

Bank of Japan rate hike could support the yen

The yen has continued to strengthen without evidence of fresh official intervention. Expectations that the Bank of Japan will raise interest rates have provided fundamental support, while the break below 155 in USD/JPY accelerated the move from a technical perspective.

Source: Bloomberg

The BOJ is leaning toward raising its benchmark interest rate by 25 basis points on September 18. Policymakers may also leave the door open to faster tightening if inflation and currency conditions require further action.

Higher Japanese interest rates would improve the yen’s yield appeal and reduce the need for repeated currency intervention. This appears to be Bessent’s preferred route, particularly because Japan may need to sell foreign assets, including US Treasuries, to finance large-scale intervention.

Traders target USD/JPY below 150

Japan spent a record $96.4 billion supporting the yen between July 30 and August 26. US participation strengthened the campaign, although officials have not disclosed the exact size of American yen purchases.

The yen rose to around 153.36 per dollar following Bessent’s latest comments. Its move through 155, a level that remained intact during previous intervention attempts, has encouraged hedge funds to increase bearish USD/JPY positions.

Options markets indicate that traders are positioning for USD/JPY to fall below 150 before the end of the year. Some longer-dated trades are targeting a decline toward 140.

The immediate test will come from the Bank of Japan’s September meeting. A rate increase accompanied by guidance pointing to faster tightening could push USD/JPY toward 150 much sooner. Any hesitation from policymakers would leave Bessent’s verbal intervention facing a more difficult test from currency markets.