Bessent Presses Japan for Fiscal Discipline and Higher Interest Rates
US Treasury Secretary Scott Bessent has been urging Japan to tighten its fiscal policy and raise interest rates as a condition for securing Washington's support to shore up the weakening yen. In June, Japanese Finance Minister Satsuki Katayama contacted Bessent to request US assistance with yen intervention.
Bessent believed that Japan needed to address its fiscal policy first, privately urging Katayama and other officials to reduce government spending for months. He also urged the Bank of Japan (BOJ) to raise interest rates, according to sources familiar with the situation.
The Japanese government is concerned about inflation caused by the weakening yen, which could hurt Prime Minister Sanae Takaichi's popularity among voters. However, Bessent is more concerned about the impact of a sell-off in Japanese government bonds on US Treasuries.
The BOJ raised interest rates in June and again in September, sending a hawkish signal that a rate increase was imminent. This decision proved decisive, with the yen surging against the US dollar after the BOJ meeting.