Sanae Takaichi’s jab at the Bank of Japan’s independence may face political reality check

A pledge by Japan’s next likely prime minister to reassert government sway over the central bank has fanned worries about political interference in monetary policy, however, a weak yen and politics could limit any such push.

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Sanae Takaichi is set to become Japan’s next premier and has already rattled markets by declaring control over the direction of monetary policy following her party leadership win, reviving memories of Shinzo Abe’s radical economic stimulus last decade.

“The government must be responsible for fiscal and monetary policy. The Bank of Japan (BoJ) will then consider the most appropriate means,” Takaichi told a news briefing upon her victory in the weekend race, stressing the need to focus on reflating growth.

Her leadership could present the biggest political challenge to Bank of Japan Governor Kazuo Ueda, a soft-spoken academic who took the helm two years ago charged with dismantling the radical monetary stimulus of his Abe-appointed predecessor.

The extent of Ms. Takaichi’s challenge, however, is likely to be tempered by the risks of inflation, a sharp yen decline and her own party’s weak standing — problems her late mentor Abe never faced.