How Bessent, America’s bond salesman, cornered Japan on big spending

When Japanese finance minister Satsuki Katayama sought U.S. assistance in June to support a weakening yen, Treasury Secretary Scott Bessent delivered a familiar warning: Japan needed to address its fiscal spending and raise interest rates. For months, Bessent privately urged Katayama and other officials to rein in Japan's massive fiscal spending and raise interest rates, according to three sources familiar with the situation.

Katayama's call for Washington's help in a coordinated yen-buying spree gave Bessent an opportunity to press his case. He emphasized the need to address fundamental factors driving down the yen, such as Prime Minister Sanae Takaichi's big spending plans, and avoid any inconsistency between monetary and fiscal policies. This interaction set the stage for massive joint intervention by Washington and Tokyo in late July, showing how Bessent used Washington's leverage over currency and Treasury markets to force Takaichi to address competing demands of voters and her security partner.