The new leader of the Liberal Democratic Party, Sanae Takaichi, who is tipped to become Japan's first female prime minister, said on Thursday that the Bank of Japan should align its monetary policy with the government's economic priorities. In a televised speech, she stressed that the current rise in prices was mainly due to raw material costs and not strong domestic demand, arguing for "demand-driven" inflation and the maintenance of an accommodative monetary policy.
Takaichi, known for her expansionary views, said the BoJ's decisions should remain consistent with the national economic strategy. Her election as LDP leader immediately caused the yen to fall to an eight-month low, as markets anticipated continuity in its low interest rate policy. However, she justified her remarks, saying she did not want the currency to fall excessively, while acknowledging the competitive advantages of a weak yen for exporters.
As a candidate to succeed Fumio Kishida, if she comes to power, Takaichi plans to introduce a support plan to offset the rise in the cost of living, including a reduction in gasoline tax and a supplementary budget. These announcements led to a slight rise in Japanese bond yields, with markets anticipating a massive stimulus package. She defended her position by asserting that "growth must take precedence without compromising fiscal discipline," pointing out that most of Japanese debt is held by domestic investors, which she believes is a guarantee of bond market stability.
