PM Takaichi meets BOJ chief for first time: Why coalition leaders warn against political meddling?

Prime Minister Sanae Takaichi held her first one-on-one meeting with Bank of Japan (BOJ) Governor Kazuo Ueda following her election victory, a closely watched encounter as markets weigh the prospect of further interest rate hikes amid persistent inflation and a weak yen. The meeting, held on February 15, 2026, came as investors increasingly speculate that the central bank could move again as soon as March or April.

Inside the meeting: Signals without specifics

Following their discussion, both sides described the exchange as a general review of economic and financial conditions. Governor Ueda emphasized that the prime minister made no specific requests regarding monetary policy, and he declined to disclose details of their conversation or characterize any agreement on a near-term rate path.

Their previous talks in November preceded the BOJ’s December move, when the central bank raised its short-term policy rate to 0.75%, the highest level in roughly three decades. Under Ueda’s leadership, the BOJ has gradually stepped away from the aggressive stimulus framework of prior years, tightening policy several times since 2024 as inflation has exceeded its 2% target for nearly four years.

Markets on edge: Inflation, yen, and the next move

With living costs elevated and the yen’s weakness feeding import prices, traders have largely priced in the possibility of another hike by April. The timing remains uncertain, but the BOJ has reiterated its readiness to adjust rates further if inflation proves durable and wage growth broadens.

Currency swings have historically shaped the BOJ’s calculus, often drawing political scrutiny when the yen lurches sharply. Even so, the central bank’s guidance has stressed data dependence and careful communication with markets as it normalizes policy.

Political caution: “No meddling” in BOJ decisions

Ruling coalition leaders have publicly urged restraint, warning against political interference in monetary policy. “As for rate hikes, that’s something the BOJ ought to decide. Politicians shouldn’t intervene,” said coalition leader Yoshimura, adding that the bank must weigh market conditions and maintain dialogue with market participants.

Yoshimura acknowledged potential side effects from higher rates—such as rising mortgage costs—but noted that, given the yen’s weakness, a hike remains possible. “We therefore need to create a strong economy, such as by using the budget, so it can cope with the impact,” he said, underscoring a preference for fiscal support rather than pressure on the central bank.

Takaichi’s stance and the power of appointments

Takaichi has long been associated with expansionary fiscal and monetary views, and during the campaign some of her comments were read as favoring the benefits of a weaker yen. Since taking office, however, she has avoided direct guidance on BOJ policy. Notably, she will appoint two members to the BOJ’s nine-member board this year, a prerogative that could subtly shape the policy debate without overt intervention.

Sales tax relief on the table

The government is signaling fiscal measures to cushion households and sustain growth. Japan currently applies an 8% consumption tax on food and 10% on other goods. The administration aims to prepare a suspension or reduction by fiscal 2026, with details such as timing and financing to be debated among ruling and opposition parties.

Officials have pointed to non-tax revenues and cuts to wasteful spending and subsidies as potential funding sources. Yoshimura’s remarks also raised the possibility—though not a firm commitment—of tapping a portion of Japan’s substantial foreign currency reserves to support tax and spending plans without issuing new debt, a step that would need to be balanced against the reserves’ role in currency intervention.

BOJ independence, in practice

Japan’s legal framework grants the BOJ independence, but history shows the central bank is not immune to political currents, particularly during periods of economic stress. The current leadership’s message is clear: let the BOJ set policy, while the government uses the budget to strengthen the economy’s resilience to higher rates. That division of labor is intended to anchor confidence as the country navigates the exit from ultra-loose policy.

What to watch next

• Policy timing: Whether the BOJ moves by March or April will depend on inflation, wage data, and yen dynamics.
• Communication: Any shift in BOJ guidance on inflation persistence or wage trends could foreshadow the next step.
• Board appointments: Takaichi’s selections for two BOJ board seats may influence policy balance over the medium term.
• Fiscal supports: Details on sales tax relief, funding sources, and budget priorities will shape the growth outlook and help offset rate-related headwinds.

For now, markets are parsing every signal. The BOJ’s careful stance, the government’s pledge not to meddle, and fiscal efforts to bolster households form the three pillars of Japan’s strategy as it moves further away from the era of extraordinary monetary stimulus.