Japan Draft Urges Bank of Japan to Support Private Demand

A draft of Japan’s government economic blueprint urges the Bank of Japan to align its decisions with Prime Minister Sanae Takaichi’s drive to reflate growth. The document, seen on Wednesday, calls for monetary policy that bolsters private demand and cites legal provisions requiring the central bank to coordinate policy with the government.

“As the government seeks to achieve strong growth under its economic and fiscal policy, appropriate monetary policy that supports private demand through stable price rises is extremely important,” the draft states.

It urges the Bank of Japan to “work closely with the government to sustainably and stably achieve its 2% inflation target” while monitoring progress toward a positive cycle of wage and price gains. The blueprint will be finalized in July and marks the first such document compiled under Takaichi, who took office in October 2025.

It breaks from past practice by using explicit language on supporting demand rather than vague calls for appropriate policy.

The Bank of Japan raised its policy rate to 1 percent this month, a 31-year high. A government representative who attended the June meeting said the central bank must take “proactive and appropriate action” if the economy worsens. The benchmark 10-year government bond yield slid to 2.625 percent.

The yen traded at 161.73 per dollar near a four-decade low, while Japan’s Nikkei share average jumped more than 3.5 percent. Takaichi’s growth strategy targets more than 370 trillion yen in investment through fiscal 2040 across 17 strategic sectors. Inflation has remained near the 2 percent target for almost four years, driven in part by the Iran-linked energy shock.