By Leika Kihara
TOKYO, Feb 16 (Reuters) – Bank of Japan Governor Kazuo Ueda and Prime Minister Sanae Takaichi will hold their first bilateral meeting on Monday since the ruling party’s landslide election victory, which could serve as a venue to discuss the central bank’s rate-hike plans.
The meeting at 5 p.m. (0800 GMT) comes amid simmering market speculation that the rising cost of living, driven in part by the weak yen, could prod the central bank to raise interest rates as soon as March or April.
Their previous face-to-face talks, held in November, laid the groundwork for the BOJ’s rate hike in December. At the time of the meeting, the yen was slumping on the view that Takaichi would push back against an early rate hike by the BOJ.
Ueda told reporters after the November meeting the premier “seemed to have acknowledged” his explanation that the BOJ was gradually raising rates to ensure Japan made a smooth landing towards its inflation target. A month later, the BOJ raised its short-term policy rate to a 30-year high of 0.75%.
Takaichi’s historic election win on February 8 has heightened market attention to whether the dovish premier will renew her calls for the BOJ to keep interest rates low.
The yen’s recent rebound may change the government’s view on the desirable pace of future rate hikes, some analysts say. After sliding close to the psychologically important 160 mark in January, the yen gained nearly 3% last week in its largest rise since November 2024. The dollar stood at 152.66 yen in Asia on Monday.
Under Japanese law, the BOJ nominally enjoys independence although that has not shielded it from past political pressure to expand monetary support for a moribund economy. Yen moves have historically been key triggers of BOJ action as politicians apply pressure on the central bank for steps to influence market moves.
Known as an advocate of expansionary fiscal and monetary policies, Takaichi has stayed mum on BOJ policy, but made comments during her election campaign that were interpreted by markets as preaching the benefits of a weak yen.
She also has the authority to fill two seats opening up at the BOJ’s nine-member board this year, which could influence the central bank’s policy debate.
Under Ueda, the BOJ exited his predecessor’s massive stimulus in 2024 and has raised short-term rates several times including in December. With inflation exceeding its 2% target for nearly four years, the BOJ has stressed its readiness to keep raising interest rates. Markets have roughly priced in an 80% chance of another hike by April.
The BOJ chief typically holds a bilateral meeting with the premier about once every quarter to discuss economic and price developments.
(Reporting by Leika Kihara; Editing by Stephen Coates)
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