The yen’s plunge changes the case for Bank of Japan rate hikes

In my early years as an economics professor, I was occasionally asked to present my work to a group of international economists, and several times I was lucky enough to do so at a beautiful site overlooking Lake Geneva. One economist — quiet, thoughtful, not at all antagonistic — always appeared at those presentations, and even met me for breakfast in New York City. His name was Scott Bessent, currently Secretary of the United States Treasury under President Donald Trump. Bessent began his career managing the hedge fund owned by George Soros, and when I was appointed as an adviser to former Prime Minister Shinzo Abe, they came to see me at Yale University. As Bessent recounted in his book, I (with my Japanese accent) described to him and Soros (with his Hungarian accent) our early plans to reinvigorate Japan’s economy, including through looser monetary policy. He found those plans “inspiring,” he wrote. Yet, today, he is recommending the opposite. Trump, Bessent’s current boss, could not have less in common with Soros. But Bessent appears to be moderating, to some extent, Trump’s irrational tariff policies. Meanwhile, he is recommending a measure that, unlike tariffs, actually could help U.S. industry: higher Japanese interest rates. The Japanese yen has sunk to a 40-year low against the U.S. dollar recently. Raising interest rates would strengthen the yen, increasing the competitiveness of U.S. exports. With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.