Sanae Takaichi gives a vague statement supporting market rate hike expectations: Central bank policy is crucial for the economy and inflation.

Japanese Prime Minister Sanae Takaichi stated after a key economic meeting that implementing appropriate monetary policy is crucial for achieving both a strong economy and stable inflation. Although this stance does not explicitly support a rate hike, it implies a desire for the Bank of Japan to coordinate with government policy direction, supporting the market's widespread expectation that the central bank will raise rates before the end of January next year.

On November 12, Sanae Takaichi made this statement after the government’s Council on Economic and Fiscal Policy meeting. This was her first time convening the meeting since taking office, and Bank of Japan Governor Kazuo Ueda was also present.

Takaichi’s latest remarks present a subtle contrast to her previous reputation as a firm advocate of monetary easing. Last year, she called raising rates “absurd,” but since becoming prime minister, her wording on monetary policy has become more cautious.

Seeking a balance between policy coordination and respect for central bank independence

Takaichi's remarks after the meeting showed an effort to strike a balance between promoting policy coordination and respecting the central bank’s independence. She said, “We will continue to work together for economic development,” revealing her expectation for the central bank to coordinate with the government’s overall economic direction.

However, she did not directly oppose a rate hike, while simultaneously requiring Kazuo Ueda to report regularly to the council—a practice that continues past convention. Ueda declined to comment after the meeting, maintaining the central bank’s cautious stance.

Takaichi also demonstrated her policy inclinations through committee appointments. She named Masazumi Wakatabe, former BOJ deputy governor known for his “reflation” theory, to join the council. After the meeting, Wakatabe told reporters he hoped the BOJ would “make appropriate decisions,” but also pointed out that “the current economic situation is not very good.” He mentioned that GDP is expected to shrink in the third quarter, and inflation may slow as food prices fall.

Economic data heightens policy challenges

Japan’s economy is facing a complex situation. Economists expect that the Japanese economy will see its first contraction in six quarters in the three months ended September, with the relevant data to be released on Monday. Meanwhile, inflation in Japan has reached or exceeded the BOJ’s 2% target for three and a half consecutive years, while real household wages have mostly been declining during this period.

In this context, according to a media survey last month, about 98% of observers expect the BOJ to raise rates in January next year, with half predicting the move will occur at the policy meeting ending December 19.

Risk Warning and DisclaimerThe market involves risk, and investment requires caution. This article does not constitute personal investment advice nor does it take into account the specific investment goals, financial situation, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions in this article are appropriate for their particular circumstances. Investment decisions made based on this article are at the user's own risk.