Treasury Secretary Bessent is said to have urged Japan to strengthen monetary policy and halt a large-scale fiscal expansion, while suggesting that Japan-US relations could move toward outright confrontation. Reports have described his meeting with Finance Minister Katayama, along with analysis that US concerns are clashing with the Takaichi administration's policies.
US Treasury Secretary Bessent is said to have presented Japan with a series of demands, including firm implementation of monetary policy, an end to reflationary policies, a clear statement of the intention to raise short-term interest rates, the maintenance and restoration of the Bank of Japan's independence, and measures to curb yen depreciation, signaling a strongly negative stance toward the Takaichi administration's economic policies. Although couched partly in diplomatic language, these remarks have been interpreted as a comprehensive criticism of Japan's policies. It has been suggested that the inability of Japan and the US to reach an easy compromise could develop into a full-scale confrontation crisis.
According to reports, Secretary Bessent met with Finance Minister Katayama in May and spent more than 2 hours emphasizing his dissatisfaction with the Takaichi administration's economic policies. The US side's concerns reportedly remained unresolved thereafter, with the US Treasury continuing to express serious misgivings about Japan's monetary and fiscal management. Japan is said to have refused to make revisions, prompting some observers to conclude that the US side's patience had finally run out.
Some have viewed this as the consequence of having ignored Secretary Bessent's criticism, citing the following points: ① a proposal to effectively reduce the consumption tax on food products to 0%, ② whether it is appropriate to call expansionary fiscal policy “ultra-austerity fiscal policy,” ③ the publication of a “Basic Policy for Fiscal Policy” alongside expansionary fiscal policy, ④ a cautious stance toward Bank of Japan rate hikes and respect for its independence, and ⑤ the largest preliminary budget request in history at the end of August, totaling approximately ¥140 trillion. These have been cited as factors that heightened US distrust.
It has been suggested that deepening US concerns could spread into a global financial crisis originating in Japan, and that a breakdown in Japan-US relations could also affect the survival of the Takaichi Cabinet. As the timing of a Cabinet reshuffle approaches, reports indicate that the government may need to make major revisions to its fiscal and monetary policies.