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US weighs pressure on Japan to cut spending and raise rates amid bond selloff
The piece argues Washington is acting to prevent a potential yen crisis from turning into a bond crisis, including risks that Japan could sell US Treasurys to defend the currency.
The Guardian’s editorial says a global bond selloff tied to an inflationary shock linked to the Gulf has fed US efforts to limit Japan’s plans to reduce reliance on an international system dominated by America.
The outlet argues that US Treasury Secretary Scott Bessent has effectively moved on from Abenomics, signaling Japan’s government should shrink what it describes as Sanae Takaichi’s $2tn spending plans and raise interest rates, as part of conditions for US help stabilizing Japan’s currency.
The editorial cites the view that Japan could face pressure from a Fed-led rate path in response to inflation, warning that a disorderly yen rout could escalate into a bond crisis through repeated currency interventions and renewed requests to Washington for support.
It also contends that if Japan could not secure sufficient assistance, it might defend the yen by dumping US Treasury holdings, noting Japan holds more than $1tn in US Treasurys, which could then push up the very yields Washington is trying to contain.