The yen breaks 160 again! Bessant declares: the yen is "under control," the Bank of Japan "will do the right thing," and "Abenomics" has reached its end.

The yen breaks 160 again! Bessant declares: the yen is "under control," the Bank of Japan "will do the right thing," and "Abenomics" has reached its end.

A stronger dollar pushed the yen below the 160 mark again, and as market expectations for intervention rose, US Treasury Secretary Bessenter stepped in to set the tone.

The yen fell to 160.11 on Monday, triggering widespread speculation about another coordinated intervention by the US and Japan. In an interview with Reuters on Sunday, Bessant said the recent yen movement was "quite well under control," unlike the "disorderly" market conditions that previously triggered intervention. He also said he expected Bank of Japan Governor Kazuo Ueda to "do the right thing" with monetary policy and planned to meet with him during this week's G20 finance ministers' meeting.

Bessant's statement eased market expectations for immediate intervention to some extent, but he also sent a deeper policy signal—he clearly pointed out that the era of "Abenomics" in Japan has come to an end, and the Japanese economy is transitioning to a new stage with more market characteristics.

The yen broke through 160 again, but Bessant said the yen's trend was "under control."

The yen has once again fallen below the 160 level, which is widely regarded as a warning threshold. The immediate trigger for this round of depreciation was Federal Reserve Chairman Warsh's hawkish speech, in which he stated that the Fed would firmly pursue its inflation target, boosting the dollar.

The 160 level holds significant psychological importance in the market. Just last month, the US and Japan implemented a rare joint intervention to buy yen and prevent the sell-off of yen and Japanese government bonds from spreading to global markets. The yen's recent approach to and subsequent fall below this level has naturally raised serious concerns in the market about whether authorities will intervene again.

However, analysts point out that the root cause of this round of yen weakness lies in the strengthening of the US dollar and expectations of rising US interest rates, rather than factors within Japan itself. This may lead the authorities to remain somewhat hesitant in their intervention decisions.

In response to market speculation about intervention, Bessant stated clearly in a Reuters interview that the current yen's movement is "quite well under control," a departure from the "disorderly" situation that triggered joint intervention last month. This statement is intended to signal to the market that the US and Japan do not currently believe that the current yen depreciation has reached a level requiring immediate intervention.

Bessant: The Bank of Japan "will do the right thing"

Bessenter also revealed that he plans to hold bilateral talks with Kazuo Ueda during the two-day G20 finance ministers and central bank governors meeting in Asheville, North Carolina, on Monday.

Bessant spoke highly of Ueda, saying, "I've known him for 15 years, and he's an outstanding economist. The market has underestimated his keen insight."

It is worth noting that Bessant had previously made several public calls for the Bank of Japan to raise interest rates to combat inflation and the depreciation of the yen, and these statements have driven the market to almost fully price in the possibility of a rate hike at the September policy meeting.

On the eve of the G20 meeting, Bessant also publicly defended the joint intervention operation last month. He reportedly replied to Democratic Senator Elizabeth Warren, explaining the reasons for the US involvement in the yen intervention.

In his letter, Bessant pointed out that an uncontrolled depreciation of the yen could force Japan to passively sell off US Treasury bonds, ultimately pushing up borrowing costs for American households and businesses. This statement clearly illustrates the US's logic of interest in intervention—maintaining the stability of the yen is essentially maintaining the stability of the US Treasury bond market.

"Abenomics" has ended, and "Taichi Economics" has begun a new chapter.

Another important signal released by Bessant in the interview was his qualitative assessment of Japan's economic policy framework. He stated that Japan has "conquered" deflation, and that "Abenomics," a reflation policy framework centered on large-scale monetary stimulus, fiscal expansion, and growth reforms, has reached its historical end.

"I think we've probably reached the end of Abenomics, which is a reflation program," Bessant said.

He stated that Japan is shifting towards "Takaichi-nomics" under Prime Minister Sanae Takaichi's leadership—a new framework that is more shareholder-friendly, particularly in the labor sector, where significant deregulation has been implemented and government intervention is reduced.

Bessant's advice on Japan's fiscal policy was succinct: "I think they should sit back, enjoy the fruits of Abenomics, and let it run its course."

Regarding monetary policy, while Bessant declined to directly instruct the Bank of Japan to aggressively raise interest rates, his words revealed his trust and expectations of Kazuo Ueda: "I will not tell them what to do, but I do believe that Governor Ueda, with the support of Prime Minister Sanae Takaichi, will do the right thing."

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