US Treasury officials have suggested the possibility of coordinated US-Japan intervention to correct yen weakness while cautioning against the Takaichi administration’s reflationary policies. Rising long-term interest rates and concerns over fiscal policy lie behind the yen’s weakness, and developments going forward are being closely watched.
Amid debate over Abenomics, the economic policy of the second Abe administration, an interpretation has circulated that Secretary Bessent of the US Treasury said, “Abenomics, which was a reflationary policy, has probably come to an end.” The remarks have been interpreted as a warning to the Takaichi administration against pursuing reflationary policies.
Remarks suggesting a request for the Bank of Japan to raise interest rates have been reported in the past, but there has been little mention of specific fiscal policies. There have also been reports that remarks made during an informal meeting in Davos in January expressed concern about the Takaichi administration’s fiscal policy.
The latest remarks have been widely viewed as a warning to Takaichi reflationary policies, but the possibility that preventing further yen depreciation through coordinated intervention was also a factor has been raised. Coordinated US-Japan intervention is being discussed as a means of correcting yen weakness.
The yen’s weakness is rooted in rising long-term interest rates and concerns over fiscal policy, increasing the likelihood that intervention and coordination of monetary policy by both Japan and the US will receive greater emphasis than before. There is also debate over the possibility that interference in Japan’s affairs could extend to fiscal policy.