BOJ chief to hold first bilateral meeting with PM Takaichi

[TOKYO] Bank of Japan Governor Kazuo Ueda will hold his first bilateral meeting with new Prime Minister Sanae Takaichi on Tuesday, a closely watched event that may provide hints on how soon the central bank will resume its rate-hike cycle.

The meeting would come in the wake of the yen’s slide to a nine-month low that drew alarm from Japan’s finance minister over volatile currency moves.

While Ueda has signalled the chance of raising interest rates as soon as next month, Takaichi has voiced displeasure over the idea and urged the BOJ to cooperate with government efforts to reflate the economy.

Market bets the dovish prime minister will deliver big spending and pressure the BOJ to go slow in raising rates have prodded investors to sell yen and Japanese government bonds.

“A delay in BOJ rate hikes could trigger further yen falls and push up import costs, running counter to Takaichi’s goal of increasing real wages,” said Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities.

“The focus of the talks will be on whether the premier will be more specific about what exactly she means when calling for the BOJ to move in lockstep with the government,” he said.

The meeting will be held at 3.30 pm (0630 GMT), the Prime Minister’s Office said on Monday. While the two already met at a government panel meeting last week, it will be Takaichi’s first formal meeting with Ueda since taking office last month.

The BOJ chief typically holds a bilateral meeting after the inauguration of a new prime minister. The two also meet about once every quarter to discuss economic and price developments.

Known as a proponent of expansionary fiscal and monetary policy, Takaichi has called on the BOJ to communicate closely with the government and tread cautiously in hiking rates.

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The remarks have heightened market attention on their meeting, and whether Takaichi would acquiesce to the BOJ’s plan to raise still-low borrowing costs.

With inflation exceeding its 2 per cent target for well over three years, many market participants expect the BOJ to raise rates to 0.75 per cent from 0.5 per cent either in December or January. Ueda dropped unusually hawkish hints last month of a rate hike.

But Takaichi’s policy adviser warned against a near-term rate hike after data on Monday showed Japan’s economy contracted in the third quarter on soft consumption and exports.

The BOJ ended a decade-long, massive stimulus last year and raised rates to 0.5 per cent in January. It has kept rates steady since then to scrutinise the economic impact of higher US tariffs. REUTERS