US Treasury Secretary Scott Bessent has told Japan's Finance Minister Katsunobu Kato and Bank of Japan Governor Kazuo Ueda that the country's next move should be to hike interest rates, according to a report citing an interview with a US official.

Erin Browne, the US Treasury's Under Secretary for International Affairs, said Bessent met with Kato and Ueda on the sidelines of the Group of 20 finance ministers and central bank governors meeting in North Carolina. The meeting comes after Bessent was previously reported to have said he expected the Bank of Japan to "do the right thing" on monetary policy.

The Bank of Japan is scheduled to hold its policy meeting on September 17-18, with markets widely expecting the central bank to raise its policy rate further. Browne said Bessent emphasized the importance of Japan clearly signaling to markets that it is clearing the way for fiscal sustainability and higher interest rates.

These comments are likely to further intensify market expectations that the Bank of Japan will hike rates at its September meeting. Speculation has been growing about a faster pace of rate increases since the US and Japan conducted a coordinated intervention in the foreign exchange market following the Bank of Japan's last meeting in late July.

Data released by Japan's Ministry of Finance last Friday showed the country spent a record 15.4 trillion yen on currency intervention over the past month to support the yen. The US has not yet disclosed the amount of yen it purchased, but it is expected to be substantially less than Japan's.

Over the past year, the US Treasury Secretary has repeatedly signaled that he would prefer the Bank of Japan to raise rates to help strengthen the yen, rather than seeing the central bank repeatedly intervene in the market.

On Monday, Bessent was asked in an interview about the yen's decline since the US participated in joint intervention to buy yen on July 31. "I can't dictate the natural balance. What we can do is send signals," he said. "I have information the market doesn't have, and I believe the Japanese government and the Bank of Japan will take measures to strengthen the yen."

When asked whether the Bank of Japan was likely to raise interest rates, Bessent said, "I think the market has already priced that in."