Bessent Demands Japan Rebalance Its Fiscal Policies Amid Inflation Concerns

Treasury Secretary Scott Bessent pushed Japan's finance minister Satsuki Katayama to rein in massive fiscal spending and raise interest rates to combat inflation. When Katayama called for U.S. assistance in a coordinated yen-buying spree, Bessent saw an opportunity to press his case. He urged Japan to address the fundamental factors driving down the yen, which he believed were caused by Prime Minister Sanae Takaichi's big spending plans.

Bessent's message was clear: Japan needed to overhaul its policies to support the Bank of Japan's fight against inflation. In a June 22 phone call with Katayama, Bessent emphasized the importance of consistency between monetary and fiscal policies. This conversation helped set the stage for a massive joint intervention by Washington and Tokyo in late July.

Japan's Ministry of Finance and Takaichi's office declined to comment on the matter. However, a Treasury official stated that 'monetary-policy decisions are for Japanese authorities to make' and that 'U.S. interest in orderly yen markets is not about targeting a particular exchange rate.'