Japanese Finance Minister Satsuki Katayama denied discussing interest rate increases with U.S. Treasury Secretary Scott Bessent during their recent meeting at the G20 finance ministers’ gathering in North Carolina. Katayama’s remarks followed Bessent’s public comments suggesting that Japan should take measures to strengthen the yen, which has been under pressure despite a historic joint intervention by Japan and the United States earlier this year.

Katayama said on Monday that while both sides agree on the importance of maintaining orderly yen markets to ensure global financial stability, including that of the U.S., there was no dialogue about raising interest rates. She emphasized that decisions regarding monetary policy remain the purview of the Bank of Japan (BoJ).

Bessent, speaking to CNBC, expressed expectations that Japan would act to support the yen amid ongoing volatility. The currency weakened to a four-decade low of 163.99 yen per U.S. dollar before the July intervention, which temporarily bolstered the yen to around 155.23 in early August. Since then, the yen has slipped back to approximately 159.80, sparking debate about the durability and effectiveness of the coordinated market support.

“I can’t affect the natural equilibrium. What we can do is send a signal,” Bessent said in the interview, adding that he believes the Japanese government and BoJ will implement measures leading to a stronger yen. When asked if he was referring specifically to rate hikes, he acknowledged that the market may already be pricing such moves in.

Market participants have increasingly speculated on the possibility of a BoJ rate hike ahead of its September policy meeting. On Tuesday, the yield on Japan’s benchmark 10-year government bonds climbed to 3.0 percent, its highest level since 1996. Analysts attribute the rise to concerns about Japan’s fiscal health, driven by an expansive government budget, combined with expectations of monetary tightening in both Japan and the United States.

Takahide Kiuchi, a former central banker and economist at Nomura Research Institute, noted that such a rate increase would primarily address rising inflation pressures within Japan. However, some analysts also interpret a potential hike as a response to external pressures, including requests from the U.S. government.

The discussions and market developments underscore the delicate balancing act Japan faces in managing currency stability and inflation while coordinating with international partners amid fluctuating financial conditions.