Takaichi administration’s responsible, proactive fiscal policy takes into account fiscal disciplineIt does not mean reckless spendingCannot say that fiscal policy alone is what determines market developmentsForex rates are determined by various factorsLong-term interest rates are also determined by various factors in the marketNeed to carefully see various factors including sustainability of wage growth to make sure Japan does not return to deflation againBut now not in a state to declare exit from deflation just yet
The final point is an indirect jab at the Bank of Japan, with the central bank looking to raise interest rates further. And that runs against what the government wishes, amid their fiscal expansion rush. Kiuchi’s remarks above are skewed towards siding with Takaichi, as you would expect. So, there’s nothing new here besides just defending their policy path even as the yen currency comes under heavy pressure.
USD/JPY sits at 158.84 on the day now, up 0.4%, as it runs up to test one-year highs. Danger, danger. The closer and quicker the pair runs up towards the 160.00 threshold, the more it is going to invite intervention talk.
This article was written by Justin Low at investinglive.com.