Japan’s government must focus on building a strong economy to withstand potential pain from future interest rate hikes, according to the leader of the ruling coalition’s junior partner. Japan plans to suspend the 8% sales tax on food for two years to mitigate the impact of rising living costs. The ruling coalition aims to support growth with fiscal policies and avoid pressuring the Bank of Japan to delay interest rate hikes. The government may tap into Japan’s $1.4 trillion foreign currency reserves to fund tax and spending initiatives without incurring fresh debt. Prime Minister Takaichi’s election victory has increased market attention on her calls for expansionary fiscal and monetary policies. The yen’s recent rebound follows market concern over Japan’s worsening finances and the BOJ’s interest rate hike to 0.75% in December. Japan is considering options to address the weak yen, which benefits export firms but raises households’ cost of living. Authorities may intervene in the currency market if the yen falls below the psychologically important level of 160 to the dollar.

Read more at Yahoo Finance: Japan’s junior coalition head warns against political meddling in BOJ policy