Japanese Finance Minister Sanae Takaichi: She is not a "reflation advocate" and highly respects the central bank's independence.

The Japanese government is focusing its efforts on reversing the market's perception that the Sanae Takaichi government is pressuring the Bank of Japan and pursuing an easing policy.

Japanese Finance Minister Satsuki Katayama said on Friday that Prime Minister Sanae Takaichi is not a "reflationist and highly respects the independence of the central bank," adding that Takaichi herself has repeatedly asked her to clarify this position to overseas investors. "We want to ensure that there is no misunderstanding on this point," he said.

Katayama also reiterated his willingness to intervene in the foreign exchange market and support the yen, while downplaying market concerns caused by the recent rise in Japanese government bond yields.

The above statement came after the Bank of Japan raised interest rates three times last week. However, both of the Bank of Japan board members nominated by the Takashi City government voted against the decision, further reinforcing market perceptions that the Japanese government is inclined to delay the pace of interest rate hikes.

Meanwhile, the yen has fallen below pre-interest-rate levels against the dollar, and Japanese government bond yields have climbed to their highest levels since the mid-1990s, with market pressure continuing to rise.

Government officials have made a series of statements in an attempt to clarify their policy stance.

Katayama's clarification was not an isolated incident. Earlier that day, Minister of Economic Growth Strategy Minoru Kiuchi also stated that the Japanese economy no longer needed inflationary policies.

Kiuchi is considered the cabinet member with the most pronounced stance on reflation, and his statements are highly consistent with Katayama's, indicating that the government intends to unify its external narrative in response to market concerns about government intervention in central bank policy.

Some market participants view Kaohsiung as the successor to the policies of the late former Prime Minister Shinzo Abe, who strongly advocated for monetary easing and flexible fiscal policies by the central bank to break Japan’s decades-long economic stagnation.

Katayama responded that with inflation returning to Japan, the current environment is completely different from what it was then, and the policy framework of the past cannot be simply applied to today.

Katayama stated that Kaohsiung City "highly respects the independence of the central bank," and that the Bank of Japan retains the authority to make daily monetary policy decisions. The government intends to avoid giving the impression of interfering with the central bank's policies.

Investor doubts persist, with legendary investor Drakenmiller and JPMorgan Chase CEO expressing their concerns.

Katayama revealed that she recently met with several figures in the American financial world in Tokyo, including billionaire investor Stanley Druckenmiller and JPMorgan Chase CEO Jamie Dimon.

Regarding the content of the meeting, she acknowledged that some investors still believe the Takashi City government is restricting the Bank of Japan's room for maneuver.

It was this concern that prompted Katayama to proactively and repeatedly emphasize the government's position of respecting the central bank's independence during this interview.

Katayama reiterated his readiness to intervene in the yen.

On the issue of exchange rates, Katayama reiterated his readiness to intervene in the market and spoke again with U.S. Treasury Secretary Bessenter 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 the financial markets and reaffirmed their shared concern about the undervaluation of the yen, as well as their intention to further deepen cooperation. Bessant later stated on X that the two sides "discussed the desirability of a strong yen that reflects Japan's strong economic fundamentals."

Earlier that day, Katayama revealed at a press conference that Trump had expressed his concerns about the weak yen to the market during their meeting in New York this week. However, she added that Trump's statement ended there, and the two sides did not discuss in detail what further measures should be taken.

Katayama believes that the recent rapid rise in bond yields is a global phenomenon, partly reflecting the increased demand for private sector funds driven by the artificial intelligence investment boom, and expects this rapid rise to be temporary.

She also pointed out that rising interest rates actually mean increased interest income on savings for Japanese households. Compared to Americans who hold more stocks, Japanese people save more in banks and are therefore expected to benefit from this.

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