After helping Japan overcome deflation, Bessent said the country should “sit back and enjoy the success of Abenomics and let that run,” a remark Reuters reported as a possible swipe at Takaichi’s expansionary fiscal stance.
A Japanese government official said the comment was “a message to the Takaichi administration to avoid excessively expansionary fiscal policy,” while a senior ruling party official said it suggested the United States was increasing pressure on Japan’s policy direction. Both officials spoke on condition of anonymity because of the sensitivity of the issue.
Takaichi, a supporter of Abenomics, has proposed a broad spending program aimed at boosting investment in strategic growth sectors and easing the burden of rising living costs on households. After she pledged to remove spending caps on key growth areas, ministries and agencies reportedly submitted the largest initial budget requests on record for the next fiscal year.
The emphasis on heavy spending has unsettled investors and pushed Japanese government bond yields to multi-decade highs, with possible spillover effects for U.S. Treasury yields. Shinohara, a former IMF deputy managing director, said the best way to support the yen would be for the Takaichi administration to present a credible commitment to fiscal reform, though he added that the chances of that happening are low.