In an interview with Bloomberg, U.S. Treasury Secretary Bessento said of Japan, “I spoke with Governor Ueda and Japan needs to rein in its inflation problem.
He even stated, “The BOJ is behind the curve.” He stated that Japan’s monetary policy is affecting other markets (hence the high 30-year U.S. Treasury rate).

Regarding foreign exchange, he noted that the yen’s depreciation will be reversed if the government continues to raise interest rates to cope with rising prices.
This could be taken to mean that the U.S. is being inconvenienced by Japan’s failure to deal with inflation, and this is likely to put pressure on the BOJ for its next meeting.
However, whether the BOJ is ready to raise interest rates immediately is likely to be a long way off, as seen in the recent press conference by Governor Ueda. If that is the case, it will take time for the yen to correct its weakness.

On the other hand, regarding the U.S., he stated that a 0.5% rate cut in September is quite possible and that the U.S. policy rate should be lower by 1.50-1.75%. If that is the level of interest rates the U.S. desires, the dollar may sell off further.

At the same time, Mr. Bessent proposed four conditions for the next Fed chairman.

(1) A person who can gain the confidence of the market.
(2) Ability to analyze complex economic data
(3) Management ability to reach consensus on the FOMC
(4) The ability to make astute predictions about the future.

These are very straightforward requirements, and we are not saying that the person is someone who can follow President Trump’s intentions. The name of Director Waller is surfacing in the primaries, but it may be so if the above four conditions are applied.

In equities, the Nikkei 225 reached new highs on the back of the U.S. AI boom, and stocks such as SoftBank and Nintendo showed significant gains.
However, there are concerns that the U.S. economy will slow down, as suggested by the recent U.S. jobs report.
Although there seems to be a disconnect between the real economy and stock prices, this is a common phenomenon in the stock market as the set-up of economic slowdown = monetary easing = higher stock prices.

We are not sure whether we should sell the dollar, factoring in the slowdown in the U.S. economy, or sell the yen on the basis of risk-on in recognition of the strong stock market.
Even if the dollar is temporarily strong, there is a strong possibility that a U.S. interest rate cut is awaited and the dollar will fall, but it is also difficult to sell the dollar on this strong U.S. stock market.
Depending on the employment data, it may be possible for the dollar to rise to around ¥150 again.

The next focus is the Jackson Hole meeting, which will be held from August 21 to 23.
The next focus will be the Jackson Hole meeting, which will be held from August 21 to 23, where media questions will be focused on Governor Ueda and Chairman Powell. We expect the pressure on the yen to remain for some time to come.