The Takaichi administration is applying unprecedented pressure on the Bank of Japan to align its monetary policy with the government’s growth strategy. In June, the Bank of Japan raised its policy rate to 1%, the highest level in over thirty years. A legal tension exists between Article 3 of the BOJ Act, which guarantees central bank independence, and Article 4, which requires coordination with the government. The government revised its wording in early July to use the term « appropriate monetary policy » to calm markets concerned about central bank independence. Japanese inflation remains close to the central bank’s 2% target.
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