Takaichi Govt to Affirm BOJ Independence in Key Policy Guidelines

Tokyo, July 14 (Jiji Press)–The Japanese government’s upcoming annual economic and fiscal policy guidelines will affirm its respect for the independence of the Bank of Japan, it was learned Tuesday. The government seems eager to address market concerns that the administration of Prime Minister Sanae Takaichi favors monetary easing and discourages the central bank from raising interest rates. The guidelines will include in a footnote referencing Article 3 of the Bank of Japan Law, which stipulates that the bank’s autonomy regarding monetary policy must be respected. The guidelines are expected to be approved at a cabinet meeting as early as July 21. In the footnote, the government plans to state that determining what monetary policy method to use will be left to the BOJ based on Article 3 of the Law. Late last month, the government released a draft of the guidelines noting that appropriate monetary policy management is extremely important for realizing a strong economy. The draft sparked a rise in government bond yields because it was widely viewed by market participants as a warning to the BOJ from the Takaichi administration, which advocates aggressive fiscal policy. In response to the market’s reaction, the government presented a revised draft to the ruling bloc on July 7, noting the importance of appropriate monetary policy management that contributes to achieving a stable increase in prices. Nevertheless, government bonds continued to be sold, forcing the government to revise the draft again. Meanwhile, the government has yet to finalize the wording for a proposed refundable tax credit system and a temporary consumption tax rate cut to zero for food products, which are being discussed by a suprapartisan national council. Discussions on the tax rate cut are proving difficult. Takaichi is expected to explain as early as this week about when the government will reach a conclusion on the issue. END [Copyright The Jiji Press, Ltd.]