The Key Man and Fulcrum Found by the Clashing Japanese and American Finance Ministers

In the evening of the 25th, when the Minister of Internal Economy, Fiscal Policy and Tax Affairs said at a post-Cabinet press conference, "We have moved past the phase of liberalizing finance and taking a nimble, fiscal-response with an Abe-nomics style (refla tion) policy," Bloomberg published Katayama's exclusive interview with the Finance Minister.

That was, indeed, something full of nuance and interest.

What was especially intriguing was not only the content but also the article's "publication method" and "handling."

"In Bloomberg's interview, Katayama said he had been told by Prime Minister Takai to explain to overseas investors that he is 'not a reflationist' and he stressed that 'there should be no misunderstanding about that.'
Finance Minister Katayama: 'Prime Minister Takai is not a reflationist,' highly respecting the Bank of Japan's independence | TBS CROSS DIG with Bloomberg

What Katayama, the Finance Minister, most wanted to convey in this Bloomberg interview was twofold: first, that "Prime Minister Takai herself is not a reflationist," and second, that the notion that "Prime Minister Takai is a reflationist" is a misunderstanding, and that Katayama has received this mission from PM Takai.

The article's title reads, "Finance Minister Katayama: 'Prime Minister Takai is not a reflationist,' greatly respects the Bank of Japan's independence" (Bloomberg English version"Finance Minister Katayama: 'Prime Minister Takai is not a reflationist,' expresses strong respect for the Bank of Japan's independence")—which also reflects this point.

Domestically, PM Takai is widely viewed as a reflationist who also pressures the Bank of Japan to raise rates. The purpose of this interview, and the crucial point, is to argue that this is a misunderstanding, and to reinforce the statement by the Minister of Internal Economy, Fiscal Policy and Tax Affairs at the Cabinet press conference on the 25th that "the phase of Abe-nomics-style reflation policies with accommodative monetary policy and active fiscal policy is over."

The basis for the minister's assertion that "the phase of Abe-nomics-style reflation policy is over" is that, regardless of fiscal policy, the Bank of Japan has already stopped ETF purchases, reduced quarterly government bond purchases, and moved to raise interest rates, meaning monetary policy has clearly diverged from Abe-nomics.

In response to the interview's first question, Katayama said

"There are some in the U.S. who feel that the central bank governor's hands and feet are tied as a picture."

and indicated a recognition that there is a misunderstanding that PM Takai is stopping the BOJ's rate hikes.

Katayama emphasizes the "misunderstanding" to remove the label of reflationist attached to PM Takai.

The remark that "there are some in the United States who feel that the central bank governor's hands and feet are tied" was presumably aimed at the post-G20 press conference remark by U.S. Finance Secretary Bessent that "Japan should stop its reflationary policy (fiscal expansion and monetary easing)."
U.S. Treasury Secretary Yellen tells Japan to stop reflationary policies - The Nikkei

What makes Katayama's exclusive interview particularly interesting this time is
the line that says, "There are some in the U.S. who think that the central bank governor's hands and feet are tied in Japan. And that there might be reflationists (reflationists) in the Takai administration,"
which was followed by the remark, "And today that famous investor Drakkenmiller has come,"

This Drakkenmiller may well be the real unseen star of this exclusive interview.