US Treasury Secretary Pushes Japan to Abandon Expansionary Fiscal Policy
US Treasury Secretary Scott Bessent has made public comments on Japan's fiscal and monetary policy, signaling acceptance of interest rate hikes as 'Abenomics' comes to an end. In a Reuters interview, Bessent said that Japan should 'step back, enjoy the success of Abenomics, and let it ride', praising the large-scale monetary easing and fiscal stimulus led by former Prime Minister Shinzo Abe.
Bessent's comments are seen as explicit expression of concerns over Prime Minister Sanae Takaichi's expansionary fiscal policy, which includes labor market deregulation. Japan has previously conveyed US concerns through informal channels, but Bessent's public remarks have escalated the demands on Japan to abandon its signature policy.
The BOJ will hold its next monetary policy meeting on September 17-18, and markets have largely priced in a policy rate hike. Bessent's comments make it easier for Governor Kazuo Ueda to decide on a rate hike, as he expects him 'to make the right decision'. A Japanese government official noted that if the BOJ forgoes a hike, a further rise in long-term interest rates would be unavoidable.