At around 9:00 pm local time on October 1st, the 102nd Prime Minister of Japan, Shigeru Ishiba, held his first press conference at the Prime Minister's Office after taking office, announcing the dissolution of the House of Representatives at the end of the temporary session on the 9th of this month. He plans to issue a House of Representatives election announcement on the 15th and hold the election on the 27th. Ishiba pledged to decisively end deflation and called on the Bank of Japan to maintain loose monetary policy to support efforts to boost inflation and economic growth.

Getting out of deflation is the primary task. Hope to maintain loose policy.

At the press conference, Shigeru Ishiba stated,

"The Japanese economy is on the brink of overcoming deflation, and we will manage the economy and finances to prioritize achieving this goal."

"I hope that loose monetary policy can continue as a trend. I will not comment on interest rates, but I hope the Bank of Japan will maintain its current stance to help us overcome deflation."

Following his fierce victory in the Liberal Democratic Party leadership election last week, Shigeru Ishiba appointed his cabinet members and began to formulate policies. In the press conference, he made early commitments to voters, stating that he will implement economic support measures, emphasizing that the top priority of his government's economic policy is to "pull Japan out of deflation", which includes raising real wages and promoting business capital expenditure.

He also mentioned that he will instruct the cabinet to develop a new package of measures to alleviate the impact of rising living costs on families, such as providing subsidies to low-income households.

Shigeru Ishiba stated that he will continue the economic policy framework of former Prime Minister Fumio Kishida. Many people are still worried that with the weakening pressure of rising global energy and food prices, Japan may once again fall into deflation.

Before Shigeru Ishiba unexpectedly won the LDP election last Friday, most economists expected the central bank to further raise interest rates by January next year. The Bank of Japan has repeatedly emphasized that it will raise rates if the data meets its expectations. As the market expects the BOJ to gradually move away from its ultra-easy monetary policy, Japanese stocks plummeted 4.8% on Monday, the largest single-day drop since the August 5th collapse, rebounded by 1.9% on Tuesday, and opened with nearly a 2% drop on Wednesday.

Although Japan's key inflation indicators have remained at or above the central bank's 2% target level for two consecutive years, the government has not officially announced the end of deflation. The reason is that Japan could once again fall into a state of price decline.

In addition, Shigeru Ishiba also mentioned that he will immediately start further researching political reform to address issues related to politics and money. Ishiba stated that the primary task of the cabinet is to regain the public trust lost by the LDP due to the 'black money' scandal. During a press conference, Ishiba expressed views on political and financial issues, pointing out that the most urgent task currently is political reform, emphasizing the importance of achieving rule-abiding politics.

New cabinet members confirmed: Absolutely cannot cool down the economy

In the cabinet appointed on Tuesday, Shigeru Ishiba included many LDP elders, with 68-year-old Katsunobu Kato appointed as Finance Minister, who previously served as the government's chief spokesperson.

Prior to the press conference, the incoming Minister of Economic Revitalization, Akazawa Ryo, expressed that the Bank of Japan should proceed cautiously when considering further rate hikes to ensure that Japan truly overcomes deflation.

Ryo Akazawa, who has a close relationship with Shigeru Ishiba, stated that

"I hope the Bank of Japan will make cautious judgments, and we absolutely cannot cool down the economy in any way at the moment. My idea is that overcoming deflation should be a top priority."

Analysis believes that comments from Akazawa Akira reinforce the view that the Sukehiro government is not currently seeking further normalization of monetary policy. This speech may solidify the views of market participants that the central bank will not raise interest rates at the end of this month.

Another indication suggests that as the election approaches, the new Japanese government may be more inclined to increase support for the economy rather than policy normalization, as the new finance minister, Kato Katsunobu, hinted that the government will compile an additional budget.

Akazawa stated that the need to completely eliminate deflation in the economy has not changed, and added that real wages have just begun to rise in the past few months. Analysis believes that these remarks indicate that it may take some time before the new government is convinced that the threat of price declines has been eliminated.

Comments from Akazawa and Kato also indicate that the new government does not want to trigger financial market turmoil after the unexpected defeat of Gota Ishiba, who supported the Bank of Japan's loose policy, when the yen soared and the stock market plummeted.

"I hope to communicate appropriately with the market because the market is closely watching how the new government will manage the economy," Kato said. "We have received clear instructions that the goal is an economy focused on growth. We are also working to make Japan an investment destination."

Editor/Lambor