BOJ Governor Ueda and PM Takaichi Set for Key Meeting Amid Yen Slide and Rate-Hike Debate

Bank of Japan (BOJ) Governor Kazuo Ueda will meet with newly appointed Prime Minister Sanae Takaichi on Tuesday for their first official bilateral discussion—a closely watched event that could shape expectations for Japan’s next interest-rate move. The meeting comes as the yen weakens to a nine-month low, prompting renewed concerns from Japan’s finance ministry about volatile currency swings.

Ueda has hinted that the BOJ may raise interest rates as early as next month, but Takaichi has openly expressed discomfort with the idea. She has urged the central bank to align more closely with government efforts to support economic growth and avoid premature tightening. Investors interpret her stance as dovish, expecting her administration to push for aggressive fiscal spending and slow the BOJ’s rate-hike cycle. These expectations have fueled selling pressure on both the yen and Japanese government bonds.

Analysts warn that delaying rate increases could have unintended consequences. Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, noted that a slower path for rate hikes may deepen the yen’s decline and raise import costs—undermining Takaichi’s goal of improving real wages. Markets will be focused on whether the prime minister provides clarity on her call for the BOJ to “move in lockstep” with government policy.

The meeting is scheduled for 3:30 p.m. local time (0630 GMT), according to the Prime Minister’s Office. Although the two attended a government panel last week, this will be their first formal engagement since Takaichi took office. Traditionally, the BOJ governor meets with a new prime minister soon after inauguration, with additional quarterly meetings to review economic and price trends.

Takaichi, known for backing expansionary fiscal and monetary policy, has consistently urged caution regarding future rate hikes. Her stance has heightened anticipation over whether she will support the BOJ’s plan to raise rates from the current 0.5% to a projected 0.75% later this year or early next year. Inflation has exceeded the BOJ’s 2% target for over three years, strengthening the case for tightening, and Ueda recently signaled a more hawkish outlook.

However, skepticism within the government grew after new data showed Japan’s economy contracted in the third quarter, pressured by soft consumer spending and weak exports. One of Takaichi’s key advisers warned that a near-term rate hike could add unnecessary strain to an already fragile recovery.

The BOJ ended its decade-long ultra-loose monetary policy last year, raising rates to 0.5% in January. Since then, the central bank has held steady, monitoring the effects of higher U.S. tariffs and domestic economic conditions.

This upcoming meeting may determine how Japan balances inflation control with economic stability—and how far the yen may continue to slide.