Japan’s PM Takaichi held her first meeting with Bank of Japan Governor Kazuo Ueda after her election win ahead of fiscal year 2026.
They both held their first bilateral meeting on Monday, February 16, 2026, since the ruling party’s landslide election victory, which could have served as a venue to discuss the central bank’s rate-hike plans.
The meeting came 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, 2026.
After the meeting, the two had a “general exchange of views on economic and financial developments.”
BOJ chief said the prime minister did not make any specific monetary policy requests
When asked whether he was able to gain consent from the premier on the BOJ’s rate-hike stance, Ueda said, “There’s nothing in particular I can reveal on details of what was discussed.”
The previous talks, held in November, laid the groundwork for the BOJ’s rate hike in December.
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 also heightened market attention to whether the dovish premier will renew her calls for the BOJ to keep interest rates low.
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.
On the contrary, Takaichi 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.
While markets have roughly priced in an 80% chance of another hike by April.
Japan’s coalition head warn against political meddling in BOJ policy
Ruling coalition leaders warn that Japan’s government must avoid meddling or interference in monetary policy and focus on steps to build an economy strong enough to weather the potential pain from any further interest rate hikes.
“As for rate hikes, that’s something the BOJ ought to decide. Politicians shouldn’t intervene. The BOJ would make a decision looking at various market environments and through dialogue with markets. I think the government shouldn’t meddle in detail,” said coalition leader Yoshimura.
He added, “If the BOJ were to raise interest rates, it might cause some pain, such as through (higher) mortgage rates. But when looking at the current weak yen, it’s possible the central bank could hike. We therefore need to create a strong economy, such as by using the budget, so it can cope with the impact,” said Yoshimura.
Sales tax cut coming:
The remarks suggest the ruling coalition will seek to underpin growth with fiscal policies and avoid applying explicit pressure on the Bank of Japan (BOJ) to delay interest rate hikes that could help keep unwelcome yen falls at bay.
Japan currently applies an 8% consumption tax rate on food and 10% for other goods.
Taikaichi said the government will aim to roll out the tax suspension by fiscal 2026, after debating details such as the timeframe and funding in a meeting of ruling and opposition parties.
“It’s possible to get this done during the fiscal year 2026. We need to get this done at the earliest date possible,” Yoshimura said, reiterating Takaichi’s call to seek funding through non-tax revenues as well as cuts to wasteful spending and subsidies.
Yoshimura’s remark heightens the chance the government will tap Japan’s $1.4 trillion foreign currency reserves, a priority war chest for future yen interventions, to fund its tax and spending initiatives without issuing fresh debt.
