The Bank of Japan warned Thursday of “high uncertainties” following the ruling party’s worst election result in 15 years, as it kept interest rates unchanged.
Prime Minister Shigeru Ishiba’s coalition lost its majority in Sunday’s snap vote, likely forcing him to head a minority government with support from other parties to pass legislation.
Businesses and economists worry that as concessions to other parties, Ishiba, 67, will offer tax cuts and higher spending, and go slow on reforms needed to improve Japan’s competitiveness.
There are also concerns that the government may pressure the BoJ to take a break from the gradual normalisation begun this year of its ultra-loose monetary policy, even if it leads to a weaker yen.
Yuichiro Tamaki, head of the opposition Democratic Party for the People (DPP) — which Ishiba has been courting for support — on Tuesday urged the BoJ “to avoid making big policy changes now”.
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