Japanese Prime Minister Sanae Takaichi promised to increase investment in growth sectors in the first economic blueprint finalized on Tuesday, but this promise faded as the market feared that the government might interfere with monetary policy, leading to a rise in bond yields. The Takaichi Sanae government has been struggling to dispel the market's view that it may increase spending and put pressure on the Bank of Japan to delay interest rate hikes, thereby curbing Japan's already huge debt financing costs. As government bond yields climbed to decades-long highs since June, the government was forced to adjust the language on monetary policy in the blueprint several times. As long-term interest rates rose, statements calling for the implementation of a monetary policy to “boost private demand” were removed from the early draft. After the later version linked monetary policy to the government's measures to boost economic growth, causing market shocks, the relevant content was revised to make it clear that the central bank formulates policies aimed at “achieving a steady rise in prices.” The final version of the outline retained the statement urging the Bank of Japan to align its policy with the government's policy, but added a footnote quoting provisions in the law that the independence of the Bank of Japan must be protected in formulating policies. “In order to achieve a strong economy, it is essential to properly implement monetary policy to achieve a steady rise in prices,” the final blueprint approved by the cabinet on Tuesday was written.

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