Visent sets the tone for Japan's economy ahead of the G20: The Abenomics era ends, yen fluctuations are manageable

1. On the eve of the G20 Finance Ministers' Meeting, US Treasury Secretary Yellen expressed a series of important views on Japan’s economy and monetary policy. She stated that the large-scale reflation stimulus plan initiated by former Japanese Prime Minister Shinzo Abe has “most likely come to an end,” and that 15 years of economic stimulus have accomplished their mission for the time being. She suggested that the Japanese government should “sit back and enjoy” the results of Abenomics, letting its effects play out naturally rather than continuing to intensify intervention.2. Regarding monetary policy, Yellen made it clear she would not tell the Bank of Japan “what to do,” but emphasized her full confidence in Bank of Japan Governor Kazuo Ueda’s ability to make the right monetary policy decisions, with the support of Japanese Prime Minister Sanae Takaichi. She praised Kazuo Ueda as “a great economist” whose market acumen “has been underestimated.” Previously, the market had interpreted Yellen’s remarks as an indirect encouragement for Japan to escape low interest rates and to normalize its monetary policy.3. Concerning the yen’s exchange rate, when asked whether recent volatility was “disorderly,” Yellen replied that yen fluctuations were “quite well controlled,” within a “manageable range.” Previously, she had defended last month’s joint US-Japan action to intervene in the yen’s exchange rate, explaining that extreme disorderly swings in the yen could force investors to unwind related positions, shock global financial markets, and ultimately push up US Treasury yields and increase financing costs for American households and businesses.4. Yellen confirmed she will hold a bilateral meeting with Kazuo Ueda during the G20 Finance Ministers and Central Bank Governors' Meeting that opens on August 31. Kazuo Ueda, Governor of the Bank of Japan, is expected to attend the meeting, and the market is closely watching whether their talks will send further signals regarding monetary policy coordination. Japan’s Minister of Finance Satsuki Katayama will also participate; the previously coordinated joint intervention statement with Yellen “remains valid,” and the market is closely monitoring whether there is willingness and scope for further coordination between the US and Japan.