BANGKOK -- U.S. Treasury Under Secretary for International Affairs Erin Browne praised Japan's efforts to move away from reflationary policies, telling Nikkei in an exclusive interview on Friday that the country "is on a positive inflation trajectory." U.S. President Donald Trump expressed his concerns about the yen's weakness to Prime Minister Sanae Takaichi at a Japan-U.S. summit on Sept. 22. Treasury Secretary Scott Bessent has also urged Takaichi's government to shift away from loose monetary and fiscal policies, saying at a press conference on Sept. 1 that he told Japan it needs to stop pursuing reflationary measures.

"Japan now is on a positive inflation trajectory, and has benefited from a lot of the reforms that have occurred ... [and] that continue to occur within Japan and the fiscal discipline that the prime minister has articulated to the people of Japan," Browne said in Bangkok, where the International Monetary Fund's annual meetings are being held. "We look favorably upon the prime minister and have all the confidence in the prime minister and the government of Japan." In a policy speech on Oct. 5, Takaichi repeatedly referred to the importance of "fiscal sustainability." The prime minister and Finance Minister Satsuki Katayama have also argued that now is not the time for reflationary policies. Browne's remarks suggest a softening of the U.S. administration's stance toward Japan.

"I don't think Secretary Bessent is trying to prescribe any type of monetary policy for the Bank of Japan," Browne said about Bessent's reflation comments. "I think that he's been heartened and looked favorably upon some of the reforms that Japan has put in place, as well as some of the economic progress that has been made in exiting a long period of deflation." Japan is "the largest owner of U.S. debt, and so it's really important to us that the FX market in Japan is stable," Browne said.

The U.S. and Japan carried out a coordinated yen-buying intervention at the end of July. Asked about the possibility of another round if the Japanese currency weakens further, she said, "we have all options on the table, and we continue to have very close consultations with our counterparts at the MOF [Ministry of Finance] within Japan." Long-term interest rates in the U.S. have continued to rise amid concerns about persistent inflation. Browne highlighted what she called "a really phenomenal job" of managing long-term rates in the U.S. through bond auctions and buybacks spearheaded by Bessent.

When asked about U.S. effort toward fiscal consolidation, she said, "there's two ways to lower the fiscal debt to GDP. One is to grow your way out of your debt, and the other way is to fiscally consolidate by cutting costs, and we're looking at both ways." U.S. officials have said that the coordinated yen-buying intervention was intended to prevent currency weakness from spreading across Asia.

"We don't have the same buildup of leverage that we had during the Asian financial crisis," Browne said about current regional economic conditions. "I think that insulates Asian markets and global markets more than what we experienced during the Asian financial crisis." "Countries have been quite resilient to the ongoing conflict in the Strait of Hormuz," she added.

Browne joined the Treasury Department in August after leaving U.S. bond investment giant Pimco.

In a previous interview with Nikkei in early September she commented on issues such as Japan's proposal to lower its consumption tax on food, saying the U.S. and Japan have had discussions on "appropriately addressing the debt burdens of our respective economies."