Japan's government will add a footnote to its final economic blueprint referencing a statutory clause that requires protecting the central bank's independence in formulating monetary policy, TV Tokyo reported on Tuesday.
In the version due to be finalized, the government plans to ask the Bank of Japan to guide policy appropriately "to achieve stable price rises," while making explicit that it has no intention of intervening in monetary policy, according to the report.
An earlier draft of the blueprint had unsettled markets by creating the impression that the administration of Prime Minister Sanae Takaichi - described in that draft as dovish - might seek to press the central bank to postpone planned rate increases. That perception triggered selling pressure in the yen and in government bonds.
Following the market reaction, a minister responsible for the blueprint acknowledged the need to amend the wording to calm investor concerns. The modifications are intended to remove any suggestion that the government will encroach on the central bank's remit.
The final blueprint is the first to be prepared under Takaichi's administration and is expected to be presented to the cabinet for approval next week.
Context and implications
By inserting a clarifying footnote and tightening the language on the role of the Bank of Japan, the government aims to signal a separation between fiscal direction and monetary decision-making. The explicit phrase asking the BOJ to act "to achieve stable price rises" is balanced by the accompanying statement that the government does not plan to interfere in monetary policy.
Officials moved to revise the blueprint's wording after the initial draft caused market volatility, with authorities indicating that the textual changes are meant to soothe investor jitters and reaffirm the central bank's operational autonomy.
Next steps
The document, with its revised footnote and phrasing, is likely to be approved by the cabinet next week, completing the first economic blueprint compiled by the current administration.