00:00When we see the reaction of the Japanese yen, even after the Bank of Japan raised rates,
00:07how do you assess that? What is driving this weakness and pressure?
00:15There are some people on the U.S. side who have the impression that the hands of Japan's central
00:21bank governor are tied. There is also a perception that there may be reflationists within the Takeuchi
00:28administration. On that point, the prime minister always asks me to explain to people from overseas,
00:34I am not a reflationist. She has explicitly told me to say she is not a reflationist,
00:40so we want to make sure that there is no misunderstanding on that point.
00:45She herself also has great respect for the independence of the central bank.
00:51As for how central bank independence is defined in Japan, it was clearly established when the
00:57Bank of Japan Act was revised. The BOJ is entrusted with its day-to-day operations.
01:03There have been concerns also because an appreciation of the Japanese yen could lead to what happened in
01:102024 and more market uncertainty and instability globally. Is that something that you look at?
01:19Basically, when there are disorderly conditions or excessively speculative moves, excessive volatility
01:25or disorderly market, we will intervene. In other words, we've said that we will take bold action.
01:32We've made that position very clear. And that stance remains in place even at this very moment.
01:38As long as these two administrations remain in office, we have gone so far as to say that we will
01:45not hesitate to take action. So I think it's understood that our position has been made very clear.
01:51And Scott Bassan had talked about this in various settings, including at universities and in a number of his speeches.
02:13There isn't much activity from the private sector. Right now the hyperscalers are already raising funds at interest rates of
02:215% or even 9%. In other words, what we're seeing around the world is the private sector
02:29demand for funding emerging at a crowding of government and corporate bonds. All of my European counterparts are struggling with
02:34this as well.
02:35It's not that governments are issuing too many sovereign bonds. Japan and other countries are actually trying quite hard to
02:42keep the amount of government debt issuance under control and communicate with the market.
02:48But in Europe and the US, what we're seeing is private sector demand for funding emerging at levels that far
02:55exceed that.
02:56But put on that Bank of Japan tightening and hiking rates, at what point does it become a problem, especially
03:04when you're servicing debt costs?
03:05When interest rates, specifically government bond yields rise, and the official interest rate goes up, that gradually feeds through in
03:14various ways to higher lending rates.
03:16There are various effects, but deposit rates also rise.
03:21Am I understanding correctly that perhaps higher yields in Japan, despite the fact that we have the 10-year yield
03:29at 3%, 1996 highs, are not necessarily a bad thing for the country?
03:35Of course, as government bond yields rise, fiscal spending will cost more, and to some extent we have already factored
03:43that in.
03:44But the current rise in yield is not being driven solely by factors in Japan.
03:49There are global factors at play as well, and we don't expect these trends to last that long.
03:56In other words, we're in a boom, and booms don't last forever.
04:00So that is another factor to consider.
04:06How much of the defense budget issue is also included in some of the concerns about the fiscal space of
04:15the country?
04:15First of all, the decision to revise the three key defense documents this year is not a response to international
04:22pressure, including from the United States.
04:24Rather, looking at China's recent actions, we see various areas where we are lacking when it comes to what we
04:33need to defend ourselves and deter attacks or offensive actions from neighboring countries.
04:39We're also weak in cybersecurity, aren't we?
04:42That's something the United States is concerned about as well.
04:46I mean, we don't have companies like Anthropic or OpenAI.
04:51On the other hand, we have strength in physical technologies.
04:56That's the situation.
04:57We also don't have large drone units.
05:00In other words, there are many capabilities we simply don't have.
05:05So we need to acquire those capabilities.
05:08Even that would cost more than what was promised under the current 2% level.
05:13So we're revising the plan and drawing up another five-year plan.
05:17But the Prime Minister always says it's important to show the public that Japan will actually be able to do.
05:23How much that costs is something that follows from that.
05:27Since taking office, she has never approached it by starting with the predetermined spending amount.
05:33What we're trying to figure out right now is sort of the final size of the defense budget, right? The
05:39spending.
05:41Bloomberg has reported 3.5% of GDP, but I know that you've said that that should still be consistent
05:47with falling debt-to-GDP ratio.
05:49I am aware that Bloomberg reported the 3.5% figure, and I was asked about it at a press
05:55conference.
05:56But neither the Defense Ministry nor the United States has ever told us anything along those lines.
06:03That's something the Prime Minister herself should decide on.
06:06And then, of course, Japan relies heavily on the US-Japan alliance.
06:12Fundamentally, we need to have the resolve to defend ourselves.
06:14So the important thing is to identify what we need to be able to do but cannot currently do with
06:21our existing capabilities and equipment.
06:23And then acquire the capabilities needed to do those things.
06:26Our approach is to determine how much that will cost based on those needs and work towards that.
06:32The current course is the first time we need to look at the next step from focusing and planning.
06:32And now we will be able to write a carrier's function to explain the appropriate way of a traditional position.
06:32So, then we can see you nextрам that will show up to the next step.
06:33The second step is to start as well as an attempt.
06:33You
