The Bank of Japan got the message. Then they conveyed it to markets.

Scott Bessent’s running Japanese monetary policy now, and he knows, just like everyone else knows, that the only way to durably stanch the bleeding in the yen is for the BoJ to raise rates aggressively.

A stronger yen’s a geoeconomic (there’s a bull market in compound adjectives this decade) policy goal for The White House, and in accepting Bessent’s help defending the yen over the summer, Tokyo ceded sovereignty over monetary policy to the US Treasury.

It’s been a very, very long time since the bank’s been as hawkishly inclined as it is currently. “[A]s underlying inflation approaches 2%, we have come to believe we need to pay greater attention than before to upside risks,” Kazuo Ueda told reporters in Asheville this week, following the one-on-one meeting with Bessent detailed in the linked article above.

Ueda’s not the only BoJ member to sound a hawkish tone. There’s now widespread speculation that the bank could hike at consecutive meetings, or resort to upsized increments in an effort to placate Bessent.

The figure above gives you a sense of where things stand following a week during which the yen strengthened the most against the dollar since the coordinated US-Japan intervention in late-July.

At the intraday USDJPY lows on Thursday, the yen was the strongest since the aftermath of the April/May intervention, when the Japanese Finance Ministry went it alone.

This month’s BoJ meeting is (obviously) a lock for a hike, and at this point, the bank has no choice but to telegraph more to come.

As the figure above shows, two-year yields in Japan rose 13bps this week, the most in quite a while.

In a Friday piece documenting the carry unwind (you can always infer a carry unwind from sharp yen appreciation), Bloomberg emphasized that it feels different this time. The specter of successive rate hikes from a BoJ beholden not to Japan’s dovishly-inclined prime minister, but to Donald Trump’s “America first” Treasury secretary, may mean the game’s well and truly changed.

The linked article quoted an FX trader at BofA. “Rather than activity from any single corner of the market, the move in dollar-yen appears to reflect a broader reallocation of risk following developments over the past 48 hours,” he said.

The figure below gives you a sense of the combined spec short in the yen.

Ostensibly, that’s dry kindling, which is to say it suggests scope for more short-covering.

To reiterate: This could backfire on Bessent in a number of ways, not least of which is a scenario where the BoJ simply can’t clear the bar for a hawkish surprise at this month’s policy gathering, given how high that bar now is.

Of course, the Fed can help by refraining from a hike at its September meeting, as Chris Waller suggested they might.

On Thursday afternoon, shortly after Waller’s market-moving remarks at a Reuters event, JD Vance told CNBC’s Eamon Javers that “the Fed should be lowering interest rates.”

“We’re doing a lot of things to try to keep rates down, but it would be nice to have some help from the Federal Reserve,” Vance said.