At the government's Council on Economic and Fiscal Policy meeting held on the 30th, private-sector members expressed the view that the Bank of Japan's independence in conducting monetary policy should be respected. In their recommendations, they said it is important for medium- to long-term inflation expectations to stabilize at around 2%, and that the government and the Bank of Japan should share a common understanding of economic and price conditions and work closely together under their respective roles. Regarding fluctuations in long-term interest rates, they noted that Japan's primary balance is improving more than that of any other major country, and that the trend in the fiscal balance alone cannot explain the moves, expressing the view that the rise in long-term interest rates since 2024 has been driven by a variety of factors, including domestic and overseas economic and price conditions, monetary policy, and government bond supply and demand. They said it is important that, in the budget compilation process toward the end of the year, the overall fiscal picture, including full-year government bond issuance and market issuance, be clarified, and that highly transparent explanations of the assumptions and risks behind economic and fiscal management be provided to secure market confidence. On measures to combat high prices, they said consideration should proceed on cutting the consumption tax rate on food and beverages, providing support payments to ease the burden on workers, and reforming social security, while leaving room for reviewing subsidies for gasoline and for electricity and gas.
Advisory council urges respect for BOJ independence and stable 2% inflation expectations, supporting continued BOJ policy normalization and a stronger yen.
