Disappointment is spreading in the markets and Kasumigaseki after Prime Minister Takaichi Sanae (高市 早苗) kept Economy Minister Jōnai Minoru (城内 実) in the post during the cabinet reshuffle. Within the LDP, there had been talk of changing from Jōnai Minoru (城内 実) to Kobayashi Takayuki (小林 鷹之), a fiscal disciplinarian, but the current arrangement was ultimately maintained.
The Takaichi administration carried out a cabinet reshuffle and indicated that it would keep Economy Minister Jōnai Minoru (城内 実) in the post. Jōnai Minoru (城内 実) is regarded as a leading figure in the reflation camp, which promotes fiscal expansion and monetary easing, and had been positioned to support Sanaenomics' fiscal expansion agenda. Against this backdrop, concerns over worsening fiscal conditions spread, with market participants pointing to yen depreciation and selling of Japanese government bonds, heightening vigilance in the markets.
Meanwhile, a proposal had emerged within the LDP to appoint Kobayashi Takayuki (小林 鷹之), a former Ministry of Finance official, as economy minister in order to strengthen the party's image as fiscally disciplined. Some had expected that, if realized, the appointment would emphasize fiscal soundness, while others viewed the continued influence of fiscal expansion advocates as a possibility if Jōnai Minoru (城内 実) remained chairman of the Policy Research Council.
Remarks perceived as dismissive of the markets and potentially misleading to investors have continued to draw criticism from people around Jōnai Minoru (城内 実), and some have questioned his suitability as the government's chief economic and fiscal policymaker. The debate over fiscal stimulus has become linked to the issue of the Bank of Japan's monetary-policy independence, intensifying debate over the substance of the Basic Policy. Developments surrounding intervention by U.S. Treasury Secretary Bessent have also been reported, and international developments related to additional rate hikes may have had an impact.
A subsequent article is expected to examine in greater detail factors including the influence of the reflation camp and the "Bessent effect." At this stage, the focus is on changes in policy management through the cabinet reshuffle and the market's reaction.