TOKYO -- Japanese Prime Minister Sanae Takaichi continues to back away from support for a reflationary economic policy in a move to reassure the markets and the Trump administration that it is not overly cautious about interest rate hikes.

At a parliamentary session Thursday, Takaichi stressed that "this is not a phase in which reflationary policies are necessary," arguing her strategy was achieving a virtuous economic cycle of increasing employment and income, thereby boosting tax revenues. This "differs from so-called reflationary policies," she said.

The prime minister has promoted "responsible proactive fiscal policy" as a signature platform. The government has advanced policies including more than 370 trillion yen ($2.3 trillion) in public-private investment across 17 strategic sectors. On monetary policy as well, it had been viewed as taking a cautious stance toward interest rate hikes by the Bank of Japan.

Now, nearly a year into office, her government has suddenly begun rejecting the "reflationary policy" label.

Still, perceptions in the U.S. and financial markets that Japan is pursuing reflationary policies stem largely from a long record of past statements, and it remains unclear whether Takaichi's government can easily change that impression.

"My understanding is that reflationary policy includes monetary easing. The phase of Abenomics-style reflationary policy has ended," Minoru Kiuchi, minister of state for economic and fiscal policy, said last month.

Earlier in September, Deputy Chief Cabinet Secretary Masanao Ozaki said the Takaichi government "differs from the so-called reflationary policies that seek to expand demand." Reflation is over, says Minoru Kiuchi, minister of state for economic and fiscal policy.

"Instead, we are focusing on strengthening supply capacity and raising the economy's potential growth rate." Taken at face value, those explanations amount to a clear commitment to respect the Bank of Japan's independence. On fiscal policy, the government plans to maintain an expansive budget stance, while shifting spending priorities from stimulating demand to strengthening supply capacity. Some see this as a substantive policy adjustment after a series of warnings from financial markets and pressure from Washington.

U.S. Treasury Secretary Scott Bessent said last month that he had "told Japan it should end reflationary policies." At a summit on Sept. 22, U.S. President Donald Trump conveyed concerns about yen weakness to Takaichi, elevating foreign exchange issues to the leaders' level.

Days before that summit, the Bank of Japan raised its policy rate by 0.25 percentage points to 1.25%. However, uncertainty remained in markets regarding the pace of future rate hikes because two of the nine policy board members, Toichiro Asada and Ayano Sato, voted against the increase. The lingering uncertainty contributed to further yen weakness against the dollar.

"While other major countries are raising rates, the U.S. views it as problematic that two policy board members opposed a rate hike," a Japanese minister noted. Both Asada and Sato were appointed by Takaichi and had been regarded as dovish members cautious about further tightening.

Takaichi, Finance Minister Satsuki Katayama and Kiuchi stepped up their rejection of reflationary policies only after concerns were raised at the Sept. 22 summit.

Japanese Finance Minister Satsuki Katayama has been more vocal against reflationist policies since Takaichi and Trump met in September.

In written instructions issued to Katayama and Kiuchi during a cabinet reshuffle the prime minister also stressed the need to "provide transparent and consistent explanations of economic and fiscal management to the public and to domestic and international market participants in order to maintain market confidence." Since taking office, the prime minister has appointed figures known for favoring aggressive fiscal spending.

Among the private-sector members of the Council on Economic and Fiscal Policy are Masazumi Wakatabe, a professor at Waseda University and former deputy governor of the Bank of Japan, and Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

For the Council for Japan's Growth Strategy, she selected Tsuyoshi Kataoka of PwC Consulting and Takuji Aida of Credit Agricole Securities.

When she first ran in the Liberal Democratic Party leadership election in 2021, Takaichi described the pillars of her economic strategy as: monetary easing, flexible fiscal stimulus in emergencies, and bold crisis management and growth investment. She called them the "three arrows of Sanaenomics."

In the 2024 LDP leadership race, her second bid for the party presidency, she remarked on the Bank of Japan's monetary policy, "I think raising interest rates right now would be foolish."