U.S. Treasury Secretary Yellen affirms "Sanaenomics," does not mention yen depreciation

U.S. Treasury Secretary Scott Bessent praised Japanese Prime Minister Sanae Takaichi’s expansionary fiscal policy and told Japanese Finance Minister Satsuki Katayama that the related policies seem to be driving the Japanese stock market to record highs.

Satsuki Katayama and Bessent held their first face-to-face meeting. This meeting took place after Katayama was appointed Japan’s first female Finance Minister last week and after a brief phone conversation between the two:

Bessent told Katayama that “Sanaenomics” carries on the spirit of “Abenomics,” seems to be working well, and is sending a very positive signal.

At the beginning of the meeting, Bessent told Katayama that he was honored to be here on the day the Nikkei 225 Index broke through 50,000 points.

Katayama added that the two did not discuss details of monetary policy or the specifics of the U.S.-Japan joint foreign exchange statement signed in September.

Media analysis says that Bessent’s remarks, as relayed by Katayama, gave a positive evaluation of the expansionary fiscal policy led by Sanae Takaichi. This move may relieve Japanese policymakers, who had previously worried that Bessent might mention the issue of yen weakness.

Sanae Takaichi is known for supporting fiscal stimulus and favoring loose fiscal and monetary policy. This stance worries investors about Japan's fiscal sustainability, putting pressure on the yen and long-term interest rates. At the same time, a weak yen helps exporters’ profits, and together with expectations of fiscal stimulus, has also driven up the Japanese stock market.

Bessent has previously commented several times on exchange rate trends and Bank of Japan policy. Earlier this month, during the IMF annual meeting, he stated that if the Bank of Japan continues with the right policies, the yen will stabilize at a “proper level.” In August, he indirectly called for a rate hike, saying the Bank of Japan was “behind the curve” in dealing with inflation.

The Bank of Japan will hold a meeting later this week, and given recent domestic political uncertainty in Japan, the market widely expects it to keep rates unchanged. However, outside observers believe the Bank of Japan may raise rates again in the coming months.

Since the continued weakness of the yen is seen as giving Japanese exporters an unfair advantage over their U.S. counterparts, it was originally expected that Bessent and Katayama would discuss the exchange rate issue.

On Monday, the yen briefly dropped below the 153 mark against the dollar, touching 153.26 before rebounding to near 152.84 later in the Asian session.

In September, Bessent and Katayama’s predecessor, Katsunobu Kato, signed an agreement on currencies, reaffirming the commitment by both countries to let markets determine exchange rates and avoid gaining competitive advantage through currency manipulation.

Katayama said that on Monday, the two finance ministers also discussed sanctions against Russia, but she did not reveal details. Currently, the U.S. is stepping up efforts to curb Russian energy sales, which are a major source of funding for its war in Ukraine.

Bessent, when meeting with Kato in Washington earlier this month, had urged Japan to stop importing Russian energy. However, the Japanese side said for energy security reasons, they do not intend to stop buying Russian liquefied natural gas. Last year, about 8% of Japan’s liquefied natural gas imports came from Russia.

Bessent arrived in Tokyo from Malaysia this time, accompanying U.S. President Trump and other senior officials as part of his Asia trip. Three months ago, he went to Osaka to attend the World Expo.

Trump and Sanae Takaichi are expected to meet on Tuesday to discuss defense spending and the possible launch of a $550 billion investment fund project.

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