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

In June, Japanese Finance Minister Satsuki Katayama reached out to U.S. Treasury Secretary Scott Bessent for assistance in stabilizing the weakening yen. Secretary Bessent, who had previously advised Tokyo to reduce fiscal spending and raise interest rates, cautioned that Japan's massive spending and the BOJ's efforts to combat inflation could negatively impact U.S. Treasury markets.

Katayama's request for Washington's intervention in a coordinated yen-buying spree provided Bessent with the opportunity to push his agenda. He emphasized the need for Japan to address underlying factors driving down the yen, including Prime Minister Sanae Takaichi's fiscal spending plans, and stressed the importance of consistency between monetary and fiscal policies.

This six-day call, which has not been publicly disclosed, laid the groundwork for a significant joint intervention by the U.S. and Japan in late July, ultimately resulting in a stronger yen and less risk of Japanese bond sales to U.S. investors.