U.S. Treasury Secretary Scott Bessent characterized recent movements in the Japanese yen as "pretty well contained," indicating that the currency's recent decline does not appear to reflect the kind of disorderly market behavior that prompted a rare joint intervention by Japan and the United States last month. The yen fell below the key threshold of 160 yen per dollar on Friday, a level frequently viewed as increasing the likelihood of coordinated action to stabilize the currency.
Speaking in an interview ahead of the Group of 20 finance ministers meeting in Asheville, North Carolina, Bessent expressed confidence in the Bank of Japan’s (BOJ) ability to manage monetary policy. He anticipated that BOJ Governor Kazuo Ueda, supported by Prime Minister Sanae Takaichi, would make appropriate decisions in response to economic conditions. However, he refrained from explicitly advising more aggressive interest rate hikes by the central bank.
“I’m not going to tell them what to do,” Bessent said when asked about potential BOJ tightening measures. He also suggested that Japan may have reached the end of its long-standing economic strategy known as Abenomics, which was introduced under the late Prime Minister Shinzo Abe in 2013. Abenomics combined extensive monetary stimulus, fiscal spending, and structural reforms to tackle deflation and stimulate growth.
Bessent noted that Japan has largely moved beyond deflation and is now experiencing a shift under what he termed “Takaichi-nomics,” referencing the current prime minister’s policy approach. “Takaichi-nomics” is focused on deregulation, particularly of the workforce, and aims to create a more shareholder-friendly environment with reduced government intervention.
The U.S. official plans to meet Governor Ueda at the G20 summit, praising him as a savvy economist with whom he has maintained a professional relationship for 15 years. This outlook contrasts with Bessent’s stance last month when Washington and Tokyo acted jointly to buy yen in an effort to counter what they described as disorderly currency moves and to forestall spillover effects on global markets.
The yen’s depreciation has posed challenges for Japanese policymakers by increasing import prices and exerting upward pressure on inflation. The slow pace of BOJ’s interest rate increases has contributed to a widening interest rate gap between Japan and the United States, influencing investor behavior. The BOJ is scheduled to hold a policy meeting on September 17-18, with market observers anticipating it will raise rates again and possibly accelerate the rate-hiking cycle beyond its current pattern of roughly two increases per year.
Governor Ueda has acknowledged the risk of rising inflation and indicated a willingness to quicken the pace of tightening if financial conditions remain excessively accommodative. Despite such hawkish signaling, the yen has not sustained gains.
Prime Minister Takaichi’s economic agenda includes substantial fiscal spending intended to foster investment in growth sectors and alleviate the impact of rising living costs on households. Critics argue this fiscal expansion may conflict with the BOJ’s inflation-controlling monetary policies. The increased fiscal outlays have also contributed to a surge in Japan’s 10-year government bond yield to the highest level in three decades, raising concerns about the nation’s high debt burden.
Bessent advised that Japan should allow the benefits of Abenomics to continue unfolding, implying that the current leadership’s reform efforts could build on past progress without abrupt policy shifts.