According to a Tuesday report by the Mainichi Shimbun citing multiple anonymous sources, Japanese Prime Minister Sanae Takaichi expressed reservations about further interest rate hikes during her meeting last week with Bank of Japan Governor Kazuo Ueda. If accurate, Takaichi's reluctance toward additional near-term rate increases could complicate the central bank's timeline, as coordination between the BOJ and the newly empowered government becomes increasingly delicate. Following the report, the U.S. dollar rose by as much as 1% against the yen, surpassing the 156 level.

Citing informed sources, the Mainichi Shimbun noted that Takaichi adopted a "more assertive dovish stance" compared to her position during last November's meeting. Takaichi herself remained vague about the details of the discussion, stating only that she hopes the central bank will work closely with the government to sustainably achieve the 2% inflation target alongside wage growth. Governor Ueda described the meeting as an exchange of views on economic and financial developments, adding that the prime minister did not make any specific monetary policy requests. The meeting took place amid growing market speculation that rising living costs—partly driven by a weak yen—could prompt the BOJ to raise interest rates as early as March or April.

"Investors had expected Takaichi to shift toward more market-friendly policies, so against that backdrop, the Mainichi report came as a major surprise," said Rinto Maruyama, a foreign exchange and interest rate strategist at SMBC Nikko Securities. "This suggests a higher likelihood of a scenario where she suppresses BOJ rate hikes." Earlier this month, the yen had recovered some losses after Takaichi's Liberal Democratic Party secured an overwhelming victory in the lower house election, as investors bet that her clear majority would bring policy clarity and reduce the risk of worst-case fiscal scenarios.

Takaichi is known for her pro-stimulus stance focused on growth rather than rate hikes, though she has moderated this position somewhat to ease market concerns. She has stated that her remarks on the yen were misunderstood and that she aims to build a strong economy resilient to exchange rate fluctuations. Governor Ueda confirmed that Takaichi did not make specific demands during last week's meeting, which he characterized as a general discussion on the economy.

It has been reported that the Takaichi administration may propose successors for two BOJ policy board members as early as this week. These nominations would signal to economists and investors how strongly she intends to influence central bank policy. "If Takaichi calls for a cap on rates at 0.75%, that would be more dovish than market expectations," said Yusuke Miyairi, a foreign exchange strategist at Nomura International. "That said, even if she maintains a dovish stance, the reality is that any government attempt to block BOJ rate hikes could trigger further yen weakness and rising Japanese government bond yields, potentially increasing pressure from the U.S."

Earlier on Tuesday, the Nikkei newspaper cited unnamed U.S. government officials stating that Treasury Secretary Bassett initiated the Federal Reserve's currency check in January, rather than it being a response to a Japanese request. Following December's rate adjustment, most economists had expected the BOJ's next rate hike to occur in the summer. However, persistent currency weakness and its inflationary impact have led many to bring forward their forecasts to April. Overnight swap trading indicates about a 59% chance of a rate hike before the BOJ's April meeting, with a hike seen as almost certain by July.