Takaichi Keeps Key Economic Ministers in First Cabinet Reshuffle

Japanese Prime Minister Sanae Takaichi retained her core economic team in her first cabinet reshuffle since taking office last October, keeping both her reflationist economy minister and her fiscally conservative finance minister in place.

Minoru Kiuchi, an ally of the premier's reflationary approach, stays on as economy minister, while Satsuki Katayama, a former finance ministry official seen as cautious on fiscal matters, remains finance minister. The lack of major changes points to continuity in the government's flagship spending plans.

Speaking after the lineup was announced, Kiuchi said he would work towards both a strong economy and fiscal sustainability, adding that the government would not pursue "wanton fiscal expansion" and would seek to ease market concerns about Takaichi's policies.

Katayama's reappointment is likely to be welcomed by bond markets wary of the prime minister's plans to raise government spending, which could increase debt issuance. She played a central role in negotiations with US Treasury Secretary Scott Bessent over a rare joint US-Japan yen intervention in late July, and her retention underscores continuity in foreign exchange policy.

Other senior figures kept their posts, including Foreign Minister Toshimitsu Motegi and Defence Minister Shinjiro Koizumi, both of whom contested last year's ruling party leadership race. Of the 18 ministerial positions, eight went to incumbents, among them trade minister Ryosei Akazawa, who oversees Japan's trade negotiations with the United States.

The reshuffle was aimed chiefly at bringing the Japan Innovation Party, the coalition partner of Takaichi's Liberal Democratic Party, into the cabinet to share responsibility for policymaking. Hiroshi Nakatsuka of the party was appointed minister in charge of deregulation.

The yield on the benchmark 10-year Japanese government bond reached three-decade highs this week on concerns that the prime minister's spending plans could add to public debt, which at twice the size of the economy is the largest among advanced nations. With households squeezed by rising living costs, however, retreating from pledges to cut taxes and boost spending carries political risk.

Takaichi's commitment to cap new bond issuance at around 40 trillion yen ($256 billion) for the fiscal 2027 budget is already under scrutiny after budget requests swelled to pandemic-era levels. Japan also faces the prospect of higher defence spending in a strategy review this year, while the cost of servicing its debt rises as the central bank lifts interest rates and slows bond purchases. The Bank of Japan is widely expected to raise its main policy rate by 25 basis points to 1.25% on Friday.