Japan’s Takaichi says will implement responsible proactive fiscal policy

Key quotes

Principle of 'economy first, then fiscal policy' will be foundation of our approach.

Will strategically implement fiscal spending under the concept of responsible proactive fiscal policy.

To ensure fiscal sustainability, maintain market confidence by reducing debt to GDP ratio.

Will quickly prepare economic measures, submit essential supplementary budget to parliament.

Will not implement cash handouts LDP pledged during Upper House election, as they have not gained public understanding.

Aims to pass legislation in the current diet session to abolish provisional gasoline tax rate.

Aims to abolish provisional diesel fuel tax rate at an early date.To assist with electricity, gas bills during winter.

Will start designing a system for tax credits with benefits.

Will launch the Japan Growth Strategy Council to expand economy.

Domestic energy sources like nuclear power, perovskite solar cells are important.

To aim for early deployment of next-generation innovative reactors and fusion energy.

To discuss integrated reform of taxation, social security at cross-party conference body. Japan-U.S. alliance is foundation of Japan diplomacy and national security.

To build relationship of trust with Trump, work closely to further elevate Japan-US relations.

Market reaction

As of writing, the USD/JPY pair is up 0.26% on the day at 153.00.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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