After Shigeru Ishiba's election defeat, it is reported that the Bank of Japan insists on a gradual interest rate hike stance

According to informed sources, following the electoral defeat of Japanese Prime Minister Shigeru Ishiba, officials from the Bank of Japan believe there is no need to change the gradual interest rate hike policy stance. The sources indicated that while Bank of Japan officials will closely monitor the future fiscal policies of the Japanese government, it is appropriate to continue raising the Bank of Japan's benchmark interest rate if the economic situation develops as they expect.

The yen continued its decline against the dollar, dropping 0.4% at one point to 147.93 yen per dollar.

The sources added that the Bank of Japan's committee may maintain the interest rate at 0.5% in next week's policy meeting. As trade negotiations between Japan and the United States are still ongoing, Bank of Japan officials also hope to assess the potential impact of trade agreements on inflation trends and future economic conditions before raising interest rates again.

The ruling coalition led by Shigeru Ishiba lost its majority in the Senate in Sunday’s election, making its policies more susceptible to opposition influence, including increased fiscal spending. On the first trading day after the election, Japanese government bonds continued to face further selling pressure.

Although the ruling party led by Shigeru Ishiba has promised cash subsidies, many opposition parties are calling for more expensive measures, such as lowering the sales tax, to help families affected by inflation.

The sources stated that while the election results will not currently change the Bank of Japan's policy trajectory, some officials believe it is necessary to monitor the upward impact of these measures on inflation if the Japanese government significantly relaxes fiscal policy.

The sources noted that due to soaring prices of rice and other food items, the pace of price increases has exceeded expectations, leading Bank of Japan officials to believe that inflation risks are rising.

Japan's key inflation indicator rose 3.3% last month, ranking among the highest in the G7. Japan's inflation rate has remained high, consistently reaching or exceeding the Bank of Japan's 2% inflation target for over three years. The surge in prices has been a central issue in this Japanese election.

U.S. President Donald Trump announced earlier this month that a 25% tariff would be imposed on Japanese goods. The sources indicated that Bank of Japan officials believe this move will not significantly alter the Bank of Japan's economic outlook, as they had already anticipated a temporary stagnation in the economy in their latest outlook report in May.

As the August 1 tariff deadline approaches, Japan's Cabinet Office stated that Japan's chief trade negotiator, Akizawa Ryo, is meeting with U.S. Secretary of Commerce Howard Lutnick in Washington on Monday. The statement noted that both sides had candid and in-depth discussions on reaching a mutually beneficial agreement, while also emphasizing that Japan remains committed to protecting its national interests