Bessent Declares "Time for Takaichinomics," Indirectly Urging Japan to Raise Interest Rates

▲ U.S. Treasury Secretary Scott Bessent

U.S. Treasury Secretary Scott Bessent has made remarks that appear to urge Japan to move away from its low-interest-rate policy, pointing to long-term massive monetary easing as a factor behind the weak Japanese yen, the Nikkei reported today (August 5).

In an interview with the Nikkei conducted the previous day, Bessent assessed the economic reforms in Japan since the administration of Shinzo Abe, stating, "Fifteen years of economic stimulus have created a sustainable and robust economic foundation." He added, "The stage of Abenomics is over, and (now) is the time for Takaichinomics."

The Nikkei interpreted this as pointing out that Japan's large-scale monetary easing, which has continued since Abenomics, is the main cause of the weak yen, and as an indirect demand for Japan to shift away from its low-interest-rate policy.

The implication is that since Japan has emerged from deflation, it should raise interest rates to curb the depreciation of the yen.

While not directly demanding a rate hike, Bessent mentioned, "I have known Bank of Japan Governor Kazuo Ueda for 15 years," adding, "He has an exceptional market sense and I trust him deeply."

This was also analyzed as a remark expressing expectations for a rate hike by the Bank of Japan.

Regarding the recent joint intervention by the U.S. and Japan in the foreign exchange market by buying the yen, Bessent stated that it was because of concerns that currency selling would spread across Asia.

He explained, "Many Asian currencies are linked to the yen," and "The Asian currency crisis of the 1990s was triggered by a sharp depreciation of the yen."

Meanwhile, the Takaichi cabinet is pushing for a tax cut to lower the food consumption tax rate from the existing 8% to 1%.

Earlier today, the Japanese government decided on a basic policy during a extraordinary cabinet meeting to lower the food consumption tax rate for two years starting next April.

However, the market is concerned about the fiscal burden resulting from the cut in the food consumption tax rate, which is assessed as a factor driving up long-term government bond yields.

In connection with this, a high-ranking U.S. government official told the Nikkei, "The decision must be made by the Takaichi administration, but there are two options: accept the tax cut or work on lowering inflation," adding, "If it were me, I would choose the latter."

This was interpreted as expressing a cautious stance regarding the reduction of the food consumption tax.

The official further pointed out that Japan "relies heavily on imports (such as energy), so a weak yen will accelerate inflation."

(Photo: AP, Yonhap News)

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