Above: Scott Bessent, centre. Official White House Photo by Daniel Torok.
The yen’s move places it ahead of Sterling as the best-performing G10 currency month-to-date.
U.S. Treasury Secretary Scott Bessent has accelerated a reversal in the Japanese yen by publicly stating that the Bank of Japan is “behind the curve” in addressing inflation and that further interest rate rises were required.
Markets responded swiftly, sending Japanese government bond yields higher across the curve and pushing USD/JPY below its 50-day moving average of 146.39.
The yen’s move places it ahead of Sterling as the best-performing G10 currency month-to-date.
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i – Based on average GBP/JPY rate observed in July.
As of the time of writing Thursday, USD/JPY traded at 146.53 (-0.53%), GBP/JPY stood at 199.14 (-0.50%), and EUR/JPY hovered around 159.10 (-0.66%).
By bidding the Yen higher, foreign exchange markets are signalling a greater belief that the Bank of Japan will be encouraged to lean towards raising interest rates on account of the U.S. position.
“Bessent’s comments add to the view that the U.S. administration is trying to tackle the overvaluation of the dollar as part of a reset in the global trading system,” says Société Générale in a research note released August 14.
The White House strategy to devalue the Dollar is often referred to internally as the “Miran playbook”, and reflects a shift in U.S. policy toward greater global currency rebalancing in order to bolster exports and boost the domestic economy.
It is a strategy codified by Stephen Miran, Chairman of the Council of Economic Advisers in the Trump White House, who argues “the root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade”.
Above: GBP/JPY at 15-minute intervals showing the JPY move post-Bessent comments.
On this basis, Soc Gen analysts see scope for the yen to extend gains further, citing momentum from both macro signals and technical breaks.
“USD/JPY failed to establish itself above the 200-DMA at 149.40… could decline towards the recent low of 145.80 and a trend line near 144.40,” says the report.
EUR/JPY is also flashing warning signals after failing to match its July high of 173.97, with Société Générale pointing to the 170 level as the next potential downside marker.
Strategists warn the stronger yen could now temper the Bank of Japan’s willingness to hike rates, despite the external pressure.
“The market is responding, but the BoJ could be more reluctant to tighten if currency strength continues unchecked,” says Société Générale.
SocGen’s positioning models show that speculative accounts have already begun paring back carry trades, opening the door to broader JPY/G10 retracement.
“The lower high in EUR/JPY yesterday compared to July is another warning sign that the trend in JPY/G10 may be turning, at least tactically,” the team wrote.
The pound, which had reclaimed strength after stronger-than-expected Q2 GDP data, now finds itself outpaced by the yen’s defensive bid.
SG notes that sterling’s 3.3% recovery from early August lows may have run its course after speculative shorts were forced to cover.
“The pound continues to defy bearish seasonal trends in August,” the report said, “but the adjustment may be complete following the post-GDP relief rally.”
Attention now turns to forthcoming BoJ minutes and U.S. retail sales, both of which could add volatility to the yen narrative.
With Bessent maintaining pressure on both the Fed and the BoJ, the dollar’s role as an anchor currency in Asia may be increasingly challenged in the months ahead.
