By Leika Kihara
TOKYO (Reuters) -Sanae Takaichi, a contender to become Japan’s first female prime minister, said the country’s central bank is responsible for deciding specific means of monetary policy, refraining from repeating last year’s criticism over its interest rate hikes.
Seen by markets as an advocate of aggressive fiscal and monetary stimulus, Takaichi stirred markets last year by describing the Bank of Japan’s rate hikes as “stupid.”
“My view is that the government is responsible for setting the direction of fiscal and monetary policy, while specific monetary policy means fall under the responsibility of the BOJ,” she told a news conference on Wednesday.
“If interest rates rise sharply, that could raise questions as to whether companies can direct enough money for investment. It could also affect households’ mortgage rates,” Takaichi said.
Japan’s recent rise in inflation is driven mostly by higher import costs, she said.
“With aid to households and investment to boost productivity, I’d like to shift Japan’s state of inflation into a moderate one driven by wage growth,” Takaichi said.
Takaichi is seen as one of the frontrunners, along with Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi, in the ruling party’s leadership race to be held on October 4, after Prime Minister Shigeru Ishiba’s decision earlier this month to step down.
The other candidates are Chief Cabinet Secretary Yoshimasa Hayashi, former foreign minister Toshimitsu Motegi and former economic security minister Takayuki Kobayashi.
Takaichi’s past remarks criticising BOJ rate hikes stood out among those of other candidates, who have either stayed mum or backed moderate increases in borrowing costs.
With inflation exceeding its 2% target for well over three years, BOJ Governor Kazuo Ueda has signalled the bank’s resolve to gradually raise interest rates, still at 0.5%, to levels deemed neutral to the economy.
The next leader of the Liberal Democratic Party is likely to become prime minister as the party is by far the largest in the lower house of parliament. But the path is not guaranteed as the LDP lost its majorities in both houses under Ishiba.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Christian Schmollinger)
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