U.S. Treasury Secretary Janet Yellen rarely pressures the Bank of Japan: Raising interest rates to control inflation has "fallen behind the curve."

According to the Zhitong Finance APP, U.S. Treasury Secretary Scott Bessenet has rarely criticized foreign central bank policies, stating that the Bank of Japan has been slow to respond to inflation issues.

In an interview on Wednesday, Bessenet said, "They are behind the curve," emphasizing that this is a personal opinion and that he has discussed Japan's inflation issues with Bank of Japan Governor Kazuo Ueda. He added, "Therefore, they will have to raise interest rates and must control the inflation problem."

As Bessenet made these remarks, Japan's policy interest rate remains one of the lowest among major economies, while the country's core price index has stayed at or above the Bank of Japan's 2% target level for more than three consecutive years. After the Bank of Japan decided to keep interest rates unchanged last month, Ueda signaled a dovish stance, not committing to a timeline for the next interest rate hike.

Following the Treasury Secretary's statement, the yen strengthened against the dollar during Thursday's trading session in Tokyo, and Japan's 10-year government bond yield also rose slightly.

Hideo Kumano, Executive Director of the Dai-ichi Life Research Institute and former Bank of Japan official, stated, "Bessenet may be trying to undermine the dollar by commenting on U.S.-Japan monetary policy." He pointed out that meddling in the policies of other countries "breaks the norm and may actually make it more difficult for the Bank of Japan to act."

A spokesperson for the Bank of Japan stated on Thursday that Bessenet and Ueda regularly exchange views at international meetings but could not comment on the content or timing of these exchanges.

A recent Bloomberg survey of economists observing the Bank of Japan showed that about 42% of respondents expect Japan to raise interest rates in October, while one-third anticipate a hike in January next year. The market generally believes that the Bank of Japan will maintain the status quo at its next policy meeting on September 19.

"Previously, the market had some doubts about whether the Bank of Japan would raise interest rates this year, but under pressure from the U.S., they have to act," said Marito Ueda, General Manager of SBI Liquidity Market Research. "I think the view that the Bank of Japan will raise rates by December at the latest will begin to emerge, and more people may lean towards the judgment of a rate hike in October."

Bessenet has previously expressed approval of the Bank of Japan's interest rate hikes, believing such measures align with economic fundamentals. In April, he stated, "Given the strengthening domestic data in Japan, the Bank of Japan is raising interest rates, which is all very natural."

In a statement in June, the U.S. Treasury said, "The Bank of Japan's policy tightening should continue to be guided by domestic economic fundamentals (including growth and inflation), which will help normalize the yen's weakness against the dollar."

In its latest quarterly economic outlook, the Bank of Japan raised its median inflation forecast for the current fiscal year from 2.2% to 2.7%, citing rising food prices. Inflation expectations for fiscal years 2026 and 2027 were also raised, indicating that the central bank is gradually approaching its goal of stable inflation. Data expected to be released next week is projected to show Japan's overall inflation rate at 3% for July.

Bessenet also stated that U.S. Treasury yields are influenced by overseas trends, including market dynamics in Japan and Germany. In recent months, Japan's ultra-long-term government bond yields have soared to decades-high levels, with several auctions showing severely weak demand.

"This is a global phenomenon," Bessenet said, but he noted that U.S. 10-year Treasury yields are among the few that have decreased this year. "This indicates that the credibility of the U.S. Treasury and the Federal Reserve is anchored well in inflation expectations, but there is undoubtedly an 'spillover effect.' ”