By Leika Kihara
TOKYO, Oct 1 (Reuters) - Japanese Prime Minister Sanae Takaichi said the administration's efforts to boost the country's economic competitiveness will help ensure market confidence in the yen, according to a recorded interview aired by Nippon Television on Thursday.
She also said she told US President Donald Trump that the yen's undervaluation was a problem when the two met last month.
"Our economic policy is not aimed at manipulating exchange rates," Takaichi said.
"My administration
aims to boost Japan's growth potential by increasing the economy's supply capacity through bold investment in crisis management and growth areas," she said. "Such efforts would strengthen Japan's global competitiveness, thereby helping ensure market confidence in the yen."
US Treasury Secretary Scott Bessent also endorsed Japan's economic policy and made no specific demands when Finance Minister Satsuki Katayama met him for bilateral talks on August 31, Takaichi said.
"There's no change to our stance of pursuing both a strong economy and sustainable fiscal policy," Takaichi said.
The Bank of Japan's interest rate hikes, including one last month, have failed to prop up the yen, whose weakness has become a headache for Japanese policymakers by pushing up import costs and broader inflation.
Takaichi's ambitious spending plans have been blamed in part for weakening the yen and pushing up bond yields, as investors fret about Japan's worsening finances and the chances of additional debt issuance.
Budget requests for next fiscal year's budget totalled 143 trillion yen ($903 billion), ballooning near pandemic-era levels, and they may increase further as many items have been requested without specified amounts including defence spending.
The administration's failure to lay out details on how to fund a plan to temporarily suspend a levy on food items, as well as an expected increase in defence spending, have also made bond markets jittery.
Takaichi said the budget requests would not automatically become the size of next year's budget, stressing that the government will carefully assess which policies are necessary and effective between now and the end of this year.
"We will set clear priorities," Takaichi said. "This is part of our broader effort to reform the budget process. Within that framework, we will review both spending and revenues, while keeping a close eye on tax revenue trends."
The government will set spending at levels consistent with its goal of steadily lowering Japan's debt-to-GDP ratio and "appropriately manage" the size of bond issuances, Takaichi said.
"Let me be clear," she added. "We will secure funding in responding to fiscal needs."
Takaichi did not repeat remarks she made in a newspaper interview last month that the government would aim to cap new bond issuance at 40 trillion yen for next fiscal year's budget.
($1 = 158.3100 yen)
(Reporting by Leika Kihara; Editing by Christian Schmollinger and Thomas Derpinghaus)
