KEY TAKEAWAYS
- US Treasury Secretary Scott Bessent has publicly leaned on Japan to pursue macroeconomic policies to strengthen the yen, the price of the US participation in a joint foreign exchange intervention.
- While Bessent’s remarks are aimed at the Bank of Japan (BOJ) in the immediate term, over the longer term US pressure poses a direct challenge to Prime Minister Takaichi Sanae’s fiscal program.
- Takaichi cannot change course without crippling her government, meaning her defense of her fiscal program could mean more friction with the US, more market anxiety, and more dissent from LDP fiscal hawks to come, as well as tension with the BOJ.