Japan’s Prime Minister Sanae Takaichi reportedly urged Bank of Japan Governor Kazuo Ueda during a meeting in May to purchase Japanese government bonds if necessary to curb rising long-term interest rates.
Takaichi Sought Bond Purchases to Stabilize Markets
During a 20-minute meeting at the Prime Minister’s Office on May 22, Takaichi asked Ueda to ensure monetary policy aligned with her government’s economic agenda and to buy Japanese government bonds if needed to maintain market stability, The Japan Times reported.
According to the sources cited in the report, Ueda said any action would depend on market conditions and that the BOJ would respond if necessary.
Japan’s debt-to-GDP ratio currently stands at 248.7%, the highest in the world.
The prime minister’s office and the Bank of Japan did not immediately respond to Benzinga’s request for comment.
Government Spending Plans Raise Stakes
According to a government source, Takaichi’s request reflected concerns that increased government borrowing for crisis preparedness investments and higher defense spending could push long-term borrowing costs higher.
About three weeks later, the BOJ raised its policy rate from 0.75% to 1%, its highest level since 1995, and announced it would stop reducing bond purchases from April 2027 while reiterating its readiness to step in if bond yields spiked.
The BOJ maintained that its June policy decision was unrelated to the meeting, though one government official described it as a “trade-off” between the rate hike and changes to the bond-buying plan, the report added.
US and Japan Coordinate Yen Intervention
On Friday, the U.S. Treasury joined Japan’s Ministry of Finance in a coordinated yen-buying operation to counter what officials described as excessive volatility and disorderly movements in the currency.
Both governments said they would not hesitate to intervene again if needed.
Bessent Says Japan is Taking Yen Weakness Seriously
Treasury Secretary Scott Bessent said on Tuesday that Japan was making “serious efforts” to address the yen’s substantial undervaluation and that President Donald Trump‘s administration remained in close contact with Takaichi’s government.
He said that Japan will continue implementing the right policies to return the yen to a more normal equilibrium, while adding that although currency intervention can signal a government’s intentions, only “strong, effective policies” can deliver sustained yen strength.
In July, the yen weakened to its lowest level against the U.S. dollar in nearly four decades.
At the time of writing, the yen traded at 157.42 per U.S. dollar.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock/ Maxim Elramsisy
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