Japanese Prime Minister Sanae Takaichi has vocally rejected mounting criticism that her administration is responsible for both the yen’s significant weakening and the dramatic rise in the country's interest rates.
During a parliamentary session, Takaichi stated, "I have been repeatedly criticized for 'Takaichi's weak yen' and 'Takaichi's high interest rates,' but I clearly deny that," according to a Reuters translation of her remarks. She was directly addressing a query from opposition lawmaker Yoshifumi Hamano regarding the nation's second supplementary budget.
Sanae Takaichi, Japan's prime minister, during the United Nations General Assembly (UNGA) in New York, US, on Tuesday, Sept. 22, 2026. Photographer: Angelina Katsanis/Bloomberg via Getty Images
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The Prime Minister asserted that her government's strategy to bolster confidence in the yen hinges on building a strong and resilient economy. Her tenure has seen yields on Japanese government bonds (JGBs) surge to multi-decade highs, while the yen plummeted to its lowest level since 1986. These developments have previously necessitated market interventions by both Tokyo and Washington to stabilize the currency.
Earlier this year, Takaichi had reportedly commented that a weak yen could benefit export industries and serve as a shield against U.S. tariffs. However, she later clarified that she held no specific preference for the currency's direction. Indeed, Japan's exports have experienced a boost, partly aided by the yen's depreciation, which enhances the competitiveness of Japanese goods internationally.
Japanese Yen (JPY) Performance Year-to-Date
Regarding the bond markets, Takaichi committed to "appropriately control the amount of government bond issuance." This assurance comes amidst a period of rising yields as Japan's central bank progresses with normalizing its monetary policy and increasing policy rates.
The Prime Minister's commitment follows an earlier announcement this year of a plan to cut the country's food tax and the unveiling of a supplementary budget. These measures had raised concerns among market observers about the potential need for Japan to issue more bonds to cover increased government spending.
Japanese 10-Year Government Bond Yields
Despite Takaichi's assertion that the total bond issuance for calendar year 2026 would remain unchanged from the original budget plan, experts remain skeptical. Jesper Koll, an expert director at Monex Group, voiced his concerns back in April when the supplementary budget was first announced, stating, "Bond markets are a lot of things, but they're not stupid. You cannot increase spending without increasing debt."
