Japan hikes rates to 31-year high amid pressure from US Treasury Secretary Scott Bessent

The Bank of Japan just did something it hasn’t done in over three decades: pushed interest rates to 1.25%. The 25 basis point hike, decided in a 7-2 vote on September 18, marks the highest Japanese policy rate since 1995, and it didn’t happen in a vacuum. US Treasury Secretary Scott Bessent has been quietly, and sometimes not so quietly, nudging Tokyo toward tighter monetary policy for months. The result is a pivotal moment for the world’s fourth-largest economy as it attempts to exit the ultra-loose monetary era that defined Japanese finance for a generation. Bessent’s fingerprints on Tokyo’s rate decision The path to this hike traces back to at least May 2026, when Bessent held private meetings with Japanese officials advocating for tighter monetary conditions. His argument was straightforward: Japan’s weak yen was creating imbalances, and the country’s legacy of Abenomics-era reflation policies had run their course. Bessent escalated his public advocacy at the G20 gathering in late August, making pointed comments about the need for Japan to stabilize its currency and rein in fiscal excess. This was the sixth rate increase in the current tightening cycle, following a hike to 1.00...