Japan growth minister says economy has exited reflationary phase

Japan no longer needs a reflationary policy of aggressive monetary easing and nimble fiscal spending, according to Growth Strategy Minister Minoru Kiuchi, one of the Cabinet’s most aggressive reflationists.

“The era of ‘Abenomics-style’ reflationary policies — which involved aggressively easing monetary policy and taking a flexible approach to fiscal policy — is over,” Kiuchi said at a press conference on Friday.

He also noted that Japan is no longer in “an era of monetary easing,” but has entered a phase in which prices are gradually rising and interest rates are climbing.

Kiuchi’s comments follow renewed weakness in the yen and further gains in government bond yields this week. Finance Minister Satsuki Katayama separately said that U.S. President Donald Trump had conveyed his concern over the yen during his meeting with Prime Minister Sanae Takaichi earlier this week.

The salvo of comments by senior officials on Friday gave the impression that the government was looking to shore up the currency and reassure investors concerned about Takaichi’s spending plans. The yen gained after Katayama’s comments to briefly hit ¥158.33 against the dollar, but still remains close to levels that could spur Tokyo to intervene in the currency market again.

The remarks by Kiuchi echo recent comments by U.S. Treasury Secretary Scott Bessent. Bessent has urged Japan to move away from the reflationary policies associated with Abenomics, the economic strategy initiated by the late Prime Minister Shinzo Abe.

Kiuchi sought to draw a distinction between Abenomics and the current policy mix under Takaichi, while reiterating the government’s position that Japan has yet to decisively emerge from deflation.

“If you view Abenomics and Sanae-nomics as essentially the same thing, I would appreciate it if you could understand my remarks to mean that the latter is not reflationary policy,” he said. “I understand that we have not yet fully escaped deflation.”

Kiuchi was retained in a cabinet reshuffle last week. That helped signal policy continuity for Takaichi’s administration, but it also kept fueling the view among some market analysts that the government is still looking to pursue a loose fiscal policy while trying to slow down interest rate hikes by the Bank of Japan.

The BOJ raised its policy rate last week at a meeting attended by Kiuchi. Bessent has strongly hinted at the need for the BOJ to raise interest rates to help the yen find an appropriate level.