Japan finance minister tells Bessent PM Takaichi is not a reflationist

Japanese Finance Minister Satsuki Katayama informed US Treasury Secretary Scott Bessent on Tuesday that Prime Minister Sanae Takaichi is not a reflationist. Katayama reiterated this point to Bessent, noting that Takaichi herself has stated this on multiple occasions. Katayama emphasized her commitment to maintaining close communication with the US Treasury and working together to maintain stable currency markets.

This stance aligns with the Takaichi administration's policy of presenting itself as pursuing a "responsible and proactive" fiscal strategy, rather than pursuing reflationary policies.

In contrast, Economy Minister Minoru Kiuchi, who is seen as more aligning with reflationist policies due to his previous stance against raising interest rates and his association with a group advocating for expansionary spending, recently stated that the phase of Abenomics-style reflation policies had ended. Japan had spent a record USD96 billion in yen interventions to support its economic policies.

These comments from the key economic ministers come in the wake of Bessent's recent remarks suggesting Japan's priority should be combating inflation rather than stimulating growth. Such comments have raised concerns among markets about the potential reflationary elements still present in Takaichi's policies and those of her political allies, who have been seen to be influenced by Takaichi's budget initiatives, a temporary reduction in the food sales tax, and her ties to advisors with backgrounds in Abenomics.