The US treasury secretary, Scott Bessent, has told Japan to scale back Prime Minister Sanae Takaichi’s roughly $2tn spending plans and raise interest rates as the price of American help stabilising the yen, amid a global bond sell-off triggered by an inflation shock originating in the Gulf. The move effectively demands Japan abandon Abenomics, its long-standing low-rate, high-spending economic strategy.
What is Abenomics and why does the US want it stopped?
Abenomics, named after former prime minister Shinzo Abe, allowed Japan’s central bank to fund heavy government spending while keeping borrowing costs low, even as national debt swelled to among the highest in the world. For years this approach defied bond market pressure that might have forced other economies into austerity. Washington’s objection is not that the model has become unworkable, but that it now conflicts with US interests as the issuer of the world’s reserve currency.
Abenomics did not become financially impossible — it became inconvenient to Washington, commentators note.
Why does this matter beyond Japan?
The episode illustrates how even a major, longtime US ally with a large, self-financed economy can be pressured to alter domestic fiscal and monetary policy when it threatens American financial dominance. Japan’s experience shows that economic independence from dollar-centred global finance is becoming harder to sustain, even for wealthy exporting nations that have historically resisted market pressure on their own terms.
What lesson does this hold for Britain?
Commentators argue UK politicians, including Greater Manchester mayor Andy Burnham, should watch closely as debates intensify over Britain’s fiscal room for manoeuvre and its exposure to global bond markets. As Britain weighs its own spending ambitions and monetary flexibility, Japan’s clash with Washington underscores that greater economic self-determination is becoming both more necessary and more difficult to achieve in a world still shaped by US financial power.
