The Japanese government is mounting a concerted effort to dispel the market's entrenched impression that Prime Minister Sanae Takaichi's administration is pressuring the Bank of Japan and pursuing loose monetary policy.
Finance Minister Satsuki Katayama said on Friday that Prime Minister Takaichi is not a "reflationist" and "deeply respects the independence of the central bank," adding that Takaichi has repeatedly asked her to clarify this position to overseas investors, saying "we want to make sure there is no misunderstanding on this point."
Katayama also reaffirmed the government's readiness to intervene in the foreign exchange market to support the yen and played down market concerns triggered by the recent rise in Japanese government bond yields.
Her remarks came after the Bank of Japan raised interest rates three times last week. However, the two BOJ board members nominated by the Takaichi government both voted against the decision, further reinforcing the market's view that the Japanese government favors slowing the pace of rate hikes.
Meanwhile, the yen has weakened beyond its pre-rate-hike level against the U.S. dollar, and Japanese government bond yields have climbed to their highest level since the mid-1990s, with market pressure continuing to build.
Officials Speak Out in Quick Succession to Clarify Policy Stance
Katayama's clarification was not an isolated move. Economic Growth Strategy Minister Minoru Kiuchi said earlier the same day that Japan's economy no longer needs reflationary policies.
Kiuchi is regarded within the cabinet as the member with the most pronounced reflationist stance, and his remarks were highly consistent with Katayama's, signaling that the government intends to unify its external narrative to address market doubts about government interference in central bank policy.
Some market participants view Takaichi as the policy heir of the late former Prime Minister Shinzo Abe, who pushed hard for central bank monetary easing and flexible fiscal policy to break Japan's decades-long economic stagnation.
Katayama responded that with inflation having returned to Japan, the current environment is entirely different from that of that era, and past policy frameworks cannot simply be applied to the present.
Katayama said Takaichi herself "deeply respects the independence of the central bank," that day-to-day monetary policy decisions rest with the Bank of Japan, and that the government intends to avoid giving the impression of interfering in central bank policy.
Investor Doubts Persist as Legendary Investor Druckenmiller and JPMorgan CEO Both Voice Concerns
Katayama disclosed that she recently met with several figures from the U.S. financial community in Tokyo, including billionaire investor Stanley Druckenmiller and JPMorgan Chase CEO Jamie Dimon.
Discussing the meetings, she acknowledged that some investors still believe the Takaichi government is constraining the Bank of Japan's room for maneuver.
It is precisely this concern that prompted Katayama to proactively and repeatedly emphasize the government's respect for central bank independence during this interview.
Katayama Reaffirms Readiness to Intervene in the Yen
On the exchange rate issue, Katayama reaffirmed her readiness to intervene in the market and held another phone call with U.S. Treasury Secretary Scott Bessent on Friday.
According to a summary of the call released by Japan's Ministry of Finance, the two sides exchanged views on the latest developments in financial markets and once again confirmed their shared concern that the yen is undervalued, as well as their intention to deepen cooperation further. Bessent later said on X that the two sides "discussed the desirability of a strong yen that reflects Japan's strong economic fundamentals."
Katayama said earlier in the day at a press conference that Trump expressed concern to Takaichi about the yen's weakness during talks held in New York this week. But she added that Trump's remarks went no further than that, and the two sides did not discuss in depth what measures should be taken next.
Regarding the recent rapid rise in bond yields, Katayama said it is a global phenomenon that partly reflects rising private-sector demand for funds driven by the artificial intelligence investment boom, and she expects this rapid increase to be temporary.
She also noted that higher interest rates actually mean increased deposit interest income for Japanese households. Compared with Americans, who hold more stocks, Japanese people keep more of their savings in banks, so they are expected to benefit from it.
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