• Japan’s Economy Minister Kiuchi rules out reflationary policy under the Takaichi administration.
• Kiuchi stresses that monetary policy decisions should be left to the Bank of Japan.
• The minister warns against excessive short-term currency volatility but declines to comment on exchange rates.

Japan’s Economy Minister Minoru Kiuchi said on Thursday that the Takaichi administration is not pursuing a reflationary policy, stressing that proactive fiscal measures should not lead to unnecessary public spending.

Regarding monetary policy, Kiuchi reaffirmed the independence of the Bank of Japan (BoJ), noting that specific policy decisions should be left to the central bank as it seeks to achieve its 2% inflation target.

On foreign exchange, the minister declined to comment on specific currency movements but emphasized that excessive short-term volatility should be avoided, while acknowledging that exchange rates are determined by various market factors.

Key takeaways

Proactive fiscal policy not meant to expand unnecessary expenditures.

Reflationary policy is not what’s needed now.

If someone is calling for reflationary policy, that’s different from our policy.

Takaichi administration is not pursuing reflationary policy.

Won’t comment on long-term interest rates, but the government understands boj is conducting monetary policy to achieve 2% target.

Specific monetary policy should be left to boj.

Won’t comment on forex.

Generally speaking, forex is determined in markets by various factors.

Should avoid short-term wild swings in forex.

Market reaction

The market shows little reaction to Kiuchi’s remarks, with USD/JPY down 0.30% on Thursday, trading around 157.85 at the time of writing.