Japan should end reflation push: US

Asheville, Sep 2 (SocialNews.XYZ) Japan should move beyond the reflationary policies associated with former prime minister Shinzo Abe and begin managing the consequences of their success, US Treasury Secretary Scott Bessent has said.

Bessent told reporters after the G20 finance ministers’ meeting in Asheville that the programme known as Abenomics had achieved its central purpose of lifting Japan out of a prolonged period of disinflation.

“I think that Abenomics, which was designed to bring Japan out of disinflation as a reflationary programme, has worked,” he said.

The Treasury secretary also credited the programme with restructuring parts of Japan’s economy and reducing regulatory burdens on companies.

“One of the great parts of Abenomics is the economy has been restructured in terms of the corporate sector bringing down regulation,” he said.

“Many, many of the things that we’ve talked about here for the past few days, Japan has already done,” Bessent added.

His remarks came in response to a question about Japan’s long-term interest rates, inflation and fiscal position. Bessent said some of his conversations with Japanese officials were private, but reiterated his publicly stated assessment of the country’s economic direction.

He said Japan should allow the results of its previous reforms to take hold instead of continuing to stimulate inflation.

“We’ve talked to the Japanese, and I’ve said they had a tremendous success in Abenomics. Now, they should actually let that run and stop the reflation,” Bessent said.

He described the next phase of Japan’s economic policy as “Takaichi Nomics”, but did not outline the specific fiscal or monetary measures he believed it should include.

“I think it’s now time, as I said, for Takaichi Nomics, and I think that Japan can sit back and enjoy the benefits of a successful 11, 12, 13-year run,” he said.

Bessent presented Japan’s position as a sharp reversal from the pessimism surrounding the economy more than a decade earlier.

“In 2011, Japan was written off as dead, and now I think it’s one of the most vibrant economies in the world,” he said.

The Treasury secretary argued that inflation near the Bank of Japan’s long-standing target would demonstrate that the reflationary programme had accomplished its objective.

“If inflation is 2%, they’ve succeeded in reflating, and now they have to think about the consequences of their success,” he said.

Bessent did not publicly detail his recommendations for Japanese fiscal consolidation or comment directly on what the Bank of Japan should do with interest rates. He said parts of his bilateral discussions remained confidential.

The G20 chair’s statement affirmed the importance of central bank independence and said monetary authorities remained strongly committed to maintaining price stability and financial-system resilience.

It also said governments should safeguard fiscal sustainability, rebuild financial buffers and encourage investment that improves productivity. A stable and predictable macroeconomic environment was important for supporting growth and employment, it added.

Abenomics was introduced after Abe returned as Japan’s prime minister in 2012. It combined aggressive monetary easing, flexible fiscal policy and structural reforms in an attempt to end deflation and revive economic growth.

The Bank of Japan maintained ultra-low interest rates and large-scale asset purchases for years under that framework. Japan’s return to sustained inflation has since forced policymakers to consider how quickly they should normalise monetary policy without undermining economic growth.

Source: IANS