Are Takaichi's policies reflationary? What is really behind the BOJ's rate hikes? The substance of Sanaenomics debated at length by Nagahama, the administration's economic adviser, and former BOJ Policy Board member Kiuchi 【Takaichi administration's first year: retrospective discussion, Part 2】

This article summarizes the discussion between Nagahama Toshihiro (永濱 利廣) and Kiuchi Takahide (木内 登英) on the substance of “Sanaenomics,” the second part of their discussion. While the Takaichi administration's policies have faced criticism as reflationary, the focus of the discussion has been on the direction of policy adjustments. Yen depreciation and rising long-term interest rates were cited as factors behind market concerns, and the importance of organizing the government's communications and explaining its policy intentions overseas was highlighted.

Nagahama said that yen depreciation and rising interest rates were the result of market misperceptions, and expressed the view that the market remained unconvinced even without concerns about funding sources. Kiuchi, meanwhile, said that the policies were easy to understand and that the market was responding straightforwardly, while pointing to the possibility of increased fiscal risks and the difficulty of securing funding.

In the middle of the discussion, both participants recognized that the BOJ's independent judgment was increasingly being respected and that conditions were emerging in which the BOJ's views could prevail. On fiscal policy, they noted a tendency to restrain bond issuance, but also exchanged views that challenges remained in gaining market understanding of proposals to fund cuts in consumption tax and reduce the burden on workers. They also expressed the view that the treatment of funding sources could change substantially depending on the outcome of next fiscal year's budget process.

The discussion is scheduled to continue on the next page, covering the substance of the “de-reflation” shift, the conditions for restoring market confidence, the fiscal year 2027 budget process, and the relationship between the government and the BOJ.