Japanese Prime Minister Takaichi rejects criticism around weak yen and high interest rates

Japanese Prime Minister Sanae Takaichi firmly rejected the accusation that she is responsible for a weak Japanese yen and high interest rates, stating her claims were categorically rejected during a parliamentary session on October 19. Takaichi's administration aims to enhance confidence in the yen by fostering a robust economy and ensuring fiscal sustainability. She plans to manage the issuance of Japanese government bonds effectively during the next fiscal year's budget.

Takaichi's remarks come amid her administration's efforts to alleviate ongoing market apprehension regarding its fiscal management. In 2026, drafts of an annual economic policy blueprint raised concerns about a potential shift toward a more expansionary stance, which led to a depreciation of the yen against the dollar and an increase in long-term sovereign debt yields.

However, Growth Strategy Minister Minoru Kiuchi stated in September that Japan no longer requires an inflationary policy involving aggressive monetary easing and fiscal spending. Takaichi echoed similar sentiments earlier in October.

Finance Minister Satsuki Katayama has emphasized that Takaichi is not a reflationist, a label the Prime Minister has often been associated with in the past. Market participants are closely monitoring how the government will finance a proposed sales tax cut for food and increased defense spending without exacerbating the nation's debt burden.

Bank of Japan Governor Kazuo Ueda, who appeared alongside Takaichi in Parliament, noted that underlying inflation is nearing the central bank's 2% target. Ueda also suggested that long-term bond yields could rise if the market interprets that the BOJ is not raising the benchmark policy interest rate at a suitable pace.