Prime Minister Sanae Takaichi on Thursday rejected the notion that her economic policy is "reflationary," apparently seeking to counter market perceptions that she favors such an approach after concerns over Japan's fiscal health led to a weaker yen and higher bond yields.
Takaichi sought to distance herself from reflationary policies, which traditionally rely on monetary easing and fiscal stimulus to combat deflation, saying her government's economic policy is "different."
"We are promoting domestic investment to raise Japan's potential growth rate, increase quality employment and incomes, improve consumer sentiment, boost corporate earnings and ultimately lead to a natural tax-revenue increase," Takaichi said.
Takaichi, who took office in October 2025 and is viewed by markets as a fiscal dove, also said Japan is no longer "at a stage where it needs so-called reflationary policies."
Her remarks at a House of Representatives session came after U.S. Treasury Secretary Scott Bessent said last month that Japan should now "stop the reflation" amid the yen's weakness.
Bessent said at the time that Japan had achieved "tremendous success" under a "reflationary program" pursued by former Prime Minister Shinzo Abe, Takaichi's political mentor, who was assassinated in 2022 while delivering an election campaign speech.
After years of aggressive monetary easing, the Bank of Japan has entered a rate-hike cycle, with its key policy rate now at 1.25 percent, its highest level in about three decades.
The BOJ has signaled that further rate hikes may be on the way, with Governor Kazuo Ueda saying the central bank's policy focus is shifting from pushing inflation up toward its target of around 2 percent to keeping it at that level.
