By Yoshifumi Takemoto and Leika Kihara
TOKYO, July 17 (Reuters) – Japan’s government will state in its economic blueprint that decisions on specific monetary policy tools should be left to the Bank of Japan, a final version of the document reviewed by Reuters showed on Friday.
The language will be inserted in the blueprint’s footnote referring to a clause in law stipulating the need to protect the central bank’s independence in setting monetary policy, the document showed.
The addition is among several tweaks dovish Prime Minister Sanae Takaichi’s administration was forced to make from an earlier draft, which triggered a selloff in the yen and bonds by giving markets the impression it would pressure the BOJ to delay rate hikes.
The earlier version said the BOJ must align its decisions to the government’s economic policy, also stipulated in law, but did not make any reference to the other clause in law on the central bank’s jurisdiction over monetary policy decisions.
“To achieve a strong economy, it is very important for monetary policy to be conducted appropriately to see stable price rises,” the final version of the blueprint said.
The final blueprint will also say the government will reach a decision “by early August” on whether and by how much Japan will cut an 8% consumption tax levied on food, according to the document, which was reported earlier by Kyodo news agency.
Speaking in parliament on Friday, Finance Minister Satsuki Katayama declined to comment on what the final economic blueprint will say on monetary policy.
But she said there was “no change to the government’s stance that specific monetary policy means fall under the jurisdiction of the BOJ.”
Katayama also said the government would seek to maintain market trust in its finances by committing to stably lower Japan’s debt-to-gross domestic product (GDP) ratio.
Japan’s law grants the central bank independence from political interference, but it also requires close coordination with the government’s economic policy.
Citing that coordination mandate, the Takaichi administration and its reflationist advisers have urged the BOJ to proceed cautiously with further rate hikes.
The final version of the blueprint is expected to be approved by cabinet on Tuesday.
(Reporting by Yoshifumi Takemoto and Leika Kihara; Editing by Kate Mayberry and Jacqueline Wong)
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