(Bloomberg) -- Japan’s new government reached out to the central bank for a second straight day in a show of unity as market jitters linger over the course of the nation’s economic policy.
BOJ Governor Kazuo Ueda met with Finance Minister Katsunobu Kato and Economic Revitalization Minister Ryosei Akazawa on Thursday, a day after the BOJ chief met with new Prime Minister Shigeru Ishiba. The premier’s comments that conditions are not ripe for another interest rate hike on Wednesday triggered a sharp drop in the yen against the dollar.
“We confirmed that the Ishiba administration will continue to place the highest priority on economic and fiscal management to end deflation, and that the government and BOJ will work closely together in line with the joint statement,” Kato said to reporters following the gathering.
He was referring to a 2013 joint policy accord between the government and central bank that commits them to achieving sustainable growth with stable inflation.
While the latest meeting was similar to one held in 2021 in the early days of Fumio Kishida’s administration, the government was likely looking for an opportunity to try and calm markets after the sharp yen slide since Ishiba spoke.
Touching on Ishiba’s comments the previous day, Kato said the premier was likely just basing his comments on the BOJ’s existing explanation and its decision to hold rates steady in September.
Still, Akazawa warned that the central bank shouldn’t pour cold water on the economy at the wrong time. While the overall trend was for the central bank to normalize policy, the key question was getting the timing of its moves right, he said.
Since his appointment on Monday, Akazawa has called for caution on rate hikes saying the priority is to beat deflation. He is a former state minister of finance and a close ally of Ishiba. Akazawa said Wednesday that perceptions of Ishiba favoring a rate hike aren’t necessarily accurate.
Kato, who ran against Ishiba in the race for the nation’s top political post, said earlier this week that he strongly hopes the BOJ will appropriately conduct monetary policy toward its 2% price target, taking into account economic, price and financial conditions.
The BOJ holds its next policy meeting later this month and was already widely expected to hold rates given its recent cautious signals. Ishiba called for a general election on Oct. 27, four days before the BOJ’s next decision day.
Ishiba is expected to order an economic stimulus package soon to help households with persistent inflation. The approval ratings for his newly formed cabinet are among the lowest for a new Japanese leader in recent years.
--With assistance from Akemi Terukina.
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