From supporting Japan's intervention in the exchange rate to explicitly supporting Japan's interest rate hikes, Besent's shift in Japan's monetary policy. At the G20 finance ministers and central bank governors' meeting held in the United States these days, Besant's remarks on Japan's policies are still worth paying attention to. 1. Discuss the background A month ago, the United States and Japan joined forces to intervene in the exchange rate, causing the US dollar to quickly fall from around 163.99 to around 155.20 against the Japanese yen. But the appreciation brought by intervention was quickly eaten up by the market. Recently, the US dollar returned to around 160 against the Japanese yen, and the yield of Japanese 10-year treasury bond bonds reached 3%. The question from a month ago is back: Will the US and Japan intervene again? Will the Bank of Japan be forced to accelerate interest rate hikes? 2. Take a look at what Besent said This time, Bessen met with the Governor of the Bank of Japan, Kazuo Ueda, and the financial photo of Japan, Tsuyoshi Yamaguchi. 1) During his meeting with Ueda, Besent emphasized the need for Japan to develop and clearly communicate a prudent monetary policy to anchor inflation expectations and avoid excessive exchange rate fluctuations. The US Treasury Department also used a strong statement, stating that the yen is "significantly undervalued" and that the weak yen is increasing inflationary pressures within Japan. Beisen also supports Japan's recent market and monetary policy actions. 2) During the meeting with Gao Yue Katayama, both sides confirmed that an orderly yen market is crucial for global financial stability, and the United States and Japan will continue to maintain coordination. Katayama also explained to Besent how Japan gradually reduces its debt to GDP ratio while maintaining economic growth. He first said that the recent trend of the Japanese yen is still "basically under control" and has not yet reached the level of market disorder. Subsequently, it was expressed that it is believed that the Japanese government and the Bank of Japan will take some actions to promote the strengthening of the yen. 3) Why is it said that the Japanese yen is orderly? The Japanese yen has fallen back to around 160, but Besant still believes that the market is not out of order. This indicates that 160 is likely only a sensitive area at the political and market levels, rather than a fixed point for the mechanical defense promised by the US and Japan. The meaning is that although the Japanese yen is weak, the trading process is still relatively continuous, and market liquidity has not significantly failed. Besant is therefore more willing to let monetary policy play a role. 4) Why did Besent suddenly announce that 'Abenomics is over'? Bessen said in a pre conference interview that Japan has reached the end of Abenomics. This sentence can easily be understood as the United States opposing the growth policy of the high city government, but its meaning is closer: Japan has already overcome long-term deflation, and the re inflation framework based on large-scale monetary easing and fiscal stimulus in the past needs to be withdrawn. Simply put, Japan has moved from how to get rid of deflation to how to manage inflation and fiscal costs. 3. How to understand the implicit meaning of Besent 1) The current policy framework provided by the United States is roughly as follows: When the Japanese yen experiences a stampede and market liquidity deteriorates, the United States and Japan can intervene together. The continued weakness of the exchange rate requires Japan to address it through interest rate hikes, fiscal policies, and market communication. 2) The greater the fiscal stimulus, the higher the inflation expectations, and the greater the pressure on the Bank of Japan to raise interest rates; The more concerned the government is about debt interest, the less willing it is to see interest rates rise. The market will eventually doubt both fiscal discipline and monetary policy independence. Mainly reminding the Gao Municipal Government: We can continue to invest in strategic industries such as AI, semiconductors, and defense, as well as promote labor market reform and corporate governance, but we need to clarify the source of funds for fiscal expenditures. The Bank of Japan also needs to adjust interest rates according to the new inflation environment. 3) Japan needs to provide the market with a more credible path for interest rates. 4. How did Japan react? The official statement released by the Japanese Ministry of Finance also confirms that both sides will continue to work together around the yen market. Basically, there is a high probability that the Bank of Japan will raise interest rates in mid September. The focus is on the pace after September The actual help to the Japanese yen from 1% to 1.25% in September may not be as significant as the market imagines. The reason is also very simple. The interest rates in the United States are still significantly higher than those in Japan, and the real interest rates in Japan are still relatively low. If Ueda raises interest rates and emphasizes the need for long-term observation in the future, the market will soon start to buy expectations and sell facts. At that time, the Japanese yen may first appreciate and then weaken again. What can change the mid-term pricing is whether Ueda will inform the market that the frequency of interest rate hikes in Japan has changed. In the past, the market generally understood the Bank of Japan as raising interest rates twice a year. If after September, the Bank of Japan implies that there is still room for action in December, or acknowledges that current financial conditions are still relatively loose, the market will begin trading at a pace close to quarterly interest rate hikes. 5. So the core of the core: Is it possible for Japan's normalization cycle to go faster and have a higher endpoint? After the September meeting, we can roughly see two outcomes: 1) If the Bank of Japan raises interest rates and sends signals that it will continue to act, the appreciation of the yen will be more sustainable, and short-term Japanese bond yields will continue to rise, with the yield curve possibly flattening. The yen financing arbitrage trading will also face reassessment. 2) If the Bank of Japan maintains a clear dovish stance after raising interest rates and only emphasizes the need to look at data at every meeting, the market may quickly understand this action as a policy exchange. The US dollar against the Japanese yen may still return to around 160, and discussions of further intervention by the US and Japan will not disappear. 3) As for the unexpected non interest rate hike, the probability of this scenario is already relatively low, but the market impact will be significant. The Japanese yen may depreciate rapidly, Japanese bonds may continue to be under pressure, and the policy credibility of the Bank of Japan will be questioned. The core is whether Ueda will open a window for further interest rate hikes in December, and it also depends on whether the Takashi government can find a reliable source of funding for fiscal expenditures: if Ueda only increases once and then returns to slow observation, it is difficult for the yen to sustain a 25 basis point appreciation at once. If the Bank of Japan confirms that Japan has entered a faster monetary normalization cycle, the yen, Japanese bonds, bank stocks, and global carry trades may be repriced. Bessent has already fought for time for Japan once, now it's Japan's turn to submit the homework. This article is sponsored by @ bitget_zh, titled 'Bitget Buying US Stocks: Instant Entry, Smooth Trading'