Yen plunges! Sanae Takaichi expresses concern over the Bank of Japan's rate hike again

Japanese Prime Minister Sanae Takaichi once again pressures the central bank over monetary policy, causing the yen to plummet sharply.

According to The Daily News, citing unnamed sources, Takaichi expressed clear concerns about further interest rate hikes during her meeting last week with Bank of Japan Governor Kazuo Ueda. This stance was notably more assertive than during their previous meeting in November last year.

The Bank of Japan has tried to downplay any implications of political interference. Bloomberg previously reported that Ueda stated Takaichi did not make any specific requests during their discussion.

Following the announcement, the USD/JPY surged by 0.85%, significantly increasing exchange rate pressure. The yield on Japan’s 2-year government bonds widened its decline, dropping 3.5 basis points to 1.215%. The 5-year government bond yield fell 4 basis points to 1.565%.

Prime Minister’s Stance Hardens Compared to Before

According to The Daily News, Takaichi met with Ueda last week and expressed concern about possible further rate hikes by the Bank of Japan.

Sources cited in the report said her attitude was noticeably firmer than during their last meeting in November.

For investors, such political stance shifts often influence market expectations of the central bank’s future policy path, especially when communication windows are limited and information asymmetry exists.

Bank of Japan Downplays Political Pressure

In response to external concerns about political interference in monetary policy, BOJ Governor Ueda addressed the issue. Bloomberg reported that Ueda stated Takaichi did not make any specific requests regarding interest rate directions during their meeting, leaving room for the central bank’s independence.

Currently, the BOJ has not issued a clear signal on the next interest rate decision, and Takaichi has not publicly commented on the meeting’s content.

Yen Under Pressure, Market Sensitivity Rises

After the report was released, the forex market reacted immediately, with USD/JPY rising by as much as 0.85%. This movement reflects a re-pricing of market expectations for BOJ rate hikes. If disagreements between the Prime Minister and the central bank leadership persist, market bets on the BOJ tightening policy may be subdued.

For investors closely watching Japan’s monetary policy trajectory, Takaichi’s recent statement adds uncertainty to the BOJ’s next steps.

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