To curb rising prices that are burdening the public in Japan, it is essential to correct the yen's depreciation, which has been driving up prices of imported goods. The key lies in the Bank of Japan (BOJ)'s monetary policy.

Japan's policy interest rate is 0.5% per year, more than 3 percentage points lower than that of the United States, and a significant factor behind the weak yen. To break away from a situation where wage increases are not keeping up with soaring import prices for energy and food, among other products, the BOJ needs to gradually raise interest rates.

However, since the inauguration of Sanae Takaichi's administration, the outlook for monetary policy has become increasingly uncertain, as she is apparently seeking continued ultralow interest rates to support the economy.

Despite the inflation rate exceeding targets set by the government and the BOJ, Takaichi has repeatedly made statements seemingly in favor of restraining interest rate hikes, such as, "It is too early to feel relieved that deflation is over."

In its October monetary policy meeting, the central bank decided against an additional rate hike. BOJ Gov. Kazuo Ueda explained that he wanted to further assess the impact of high tariff policies of the administration of U.S. President Donald Trump and companies' wage hike stances ahead of spring labor negotiations. He stated, "If satisfied (with the economic data), we will adjust interest rates regardless of the political situation."

This signals an intent to continue the path of rate hikes, but a lack of communication with the government could lead to market confusion.

Takaichi advocates the continuation of the Abenomics economic policy mix promoted by the administration of the late former Prime Minister Shinzo Abe, which advanced an aggressive fiscal policy and monetary easing. She is also prepared to address rising prices through fiscal policies such as gasoline tax cuts.

However, the environment surrounding the Japanese economy has drastically changed since the Abe administration. Back then, the economy was sluggish due to deflation and the yen's significant appreciation, necessitating monetary easing. Now, the inflation rate has been above 2% for 3 1/2 years, and the interest rates that remain disproportionately low relative to actual economic conditions are causing adverse effects including the yen's excessive depreciation.

Koichi Hamada, a professor emeritus at Yale University in the United States and a former Abenomics adviser, also warns, "To curb inflation, the BOJ's monetary tightening is paramount." Ignoring changes in the economic environment and making unreasonable demands on monetary policy will not lead to sustainable economic recovery.

The BOJ should proceed with normalizing monetary policy to stabilize prices. The government, meanwhile, is urged to support companies in improving productivity, which would lead to sustainable wage increases. Both must each explore effective policies by sharing their views on the economy and prices.