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[Reflationist Retention Sets the Tone; Takaichi Cabinet Reshuffle Expected to Continue Expansionary Fiscal Policy] 1. According to Japan's Yomiuri Shimbun, Prime Minister Sanae Takaichi will reshuffle her cabinet on Thursday, with reflationist ally Minoru Kirouchi expected to remain as Minister of Economy, Trade and Industry, while Finance Minister Satsuki Katayama is also expected to retain his post. This move indicates that Takaichi has no intention of significantly tightening large-scale spending plans. 2. The market had been closely watching Kirouchi's future, using it to determine whether the recent bond sell-off prompted Takaichi to adjust her fiscal policy. Due to concerns that Japan would issue more government bonds to support expansionary fiscal policy, the yield on 10-year Japanese government bonds rose to a 30-year high of 3.025% on Tuesday and further to 3.035% on Wednesday. 3. Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, stated that the current rise in yields is mainly due to concerns about Japan's fiscal outlook, and if Kirouchi remains in office, these concerns will only intensify; unless there is a significant change in Takaichi's fiscal policy, bond yields are likely to continue to rise. The Prime Minister's Office did not immediately respond to the Yomiuri Shimbun report. 4. Minoru Jonouchi belongs to the ruling party's faction advocating large-scale spending and has close ties with supporters of "Abenomics." While Takashi also supports "Abenomics," he has recently noticed market concerns and emphasized the need to "simultaneously" achieve economic growth and fiscal reform. Analysts point out that Jonouchi's continued tenure indicates that Takashi will not make significant adjustments to his growth-revitalizing policies. Yuhi Kawano, a market analyst at Mizuho Securities, stated that Jonouchi has been a key figure in promoting Takashi's "responsible and proactive" fiscal policy, and his continued tenure will be seen by the market as a signal that the government will maintain expansionary fiscal policy. 5. As Minister of State for Special Missions in the Cabinet Office, Jonouchi has the right to attend Bank of Japan policy meetings as one of the government's representatives. He and his reflationist aides around Takashi have reservations about the normalization of the central bank's policy, worrying that rising interest rates will harm economic growth and increase spending costs. Meeting minutes show that when the Bank of Japan raised interest rates in June, Jonouchi stated that the central bank must be responsible for its decision and its negative impact. 6. However, many analysts expect the Japanese government to avoid explicitly opposing the Bank of Japan's interest rate hike, given that US Treasury Secretary Bessenter has repeatedly called for the BOJ to raise rates. The Bank of Japan is expected to raise interest rates to their highest level in 31 years on Friday and hint at its readiness to continue pushing up borrowing costs, joining other major central banks globally in combating inflation. Minoru Kōchi stated at a press conference on Tuesday that he agrees with some of the views of proponents of a "high-pressure economy," namely, the intentional use of loose fiscal and monetary policies to maintain demand at a level higher than supply.