🇺🇸 Donald Trump · 🇯🇵 Sanae Takaichi
Trump complained about the weak yen. Days later, Japan PM Takaichi signals the end of reflation
What happened
Following a complaint from US President Donald Trump about the weak yen, Japanese Prime Minister Sanae Takaichi declared that 2026 is the "first year of responsible, proactive fiscal policy". Takaichi rejected the "reflationary" label at a parliamentary debate, stating that her government will promote domestic investment to increase growth and incomes. Takaichi's move was seen as a response to pressure from Washington, which has used trade leverage against Japan in the past.
Why it matters
The yen's value has been driven down by Japan's low interest rates and global investors seeking higher returns elsewhere, hurting US manufacturers and Japanese households. The US has warned Japan to stop the reflation, and the Japanese government has intervened in the foreign exchange market to prop up the tumbling currency. The situation highlights the complexities of managing bilateral trade friction and the US-Japan relationship.
Key facts
- Japan's public debt is about 200% of GDP, the highest in the developed world.
- The Japanese government has intervened in the foreign exchange market to buy yen, spending over 27 trillion yen in 2026 alone.
- US Treasury Secretary Scott Bessent has warned Tokyo to "stop the reflation".
- Japan's economy has been in a state of deflation for decades, with core consumer inflation rising to 2.7% year-on-year in September.
- Washington has a history of using trade leverage against Tokyo, including the 1985 Plaza Accord and the 1989 Structural Impediments Initiative.
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Publisher evidence used
Reporting attributed to straitstimes.com. WorldLeadersNews links readers to the publisher and does not present a headline-only item as a full article analysis.
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