Japan's Finance Minister Katsunobu Kato speaks during an interview with Reuters at the Finance Ministry in Tokyo, Japan April 17, 2025. REUTERS/Issei Kato

By Makiko Yamazaki

TOKYO (Reuters) -Japan needs to come up with a new economic strategy that suits the current situation where inflation, instead of deflation, has become a concern unlike the times of "Abenomics" stimulus policies, Finance Minister Katsunobu Kato said on Tuesday.

"It goes without saying that the situation has changed," Kato said at a regular press conference when asked about his views on the policies that former Prime Minister Shinzo Abe deployed in 2013.

The moves were a mix of bold monetary easing, flexible fiscal policy and reform which helped the economy escape more than a decade of deflation but ran up the government's massive debt.

"Inflation, rather than deflation, has become a challenge for us now. In light of this, I believe it is necessary to develop policies that are appropriate for the current circumstances," he said.

Kato's comments come as the ruling Liberal Democratic Party's newly elected leader Sanae Takaichi, known for her staunch support of Abenomics, is widely expected to pursue reflationary policies.

Takaichi's selection as the LDP's new leader last week dampened market expectations for a near-term interest rate hike, sending stocks higher and weakening the yen.

Asked about the yen's weakness, Kato reiterated that the government will thoroughly monitor for excessive fluctuations and disorderly movements in the forex market.

"We have been seeing rapid moves in the direction of a weaker yen since last week," Kato said. "It's important that exchange rates move in a stable manner, reflecting economic fundamentals," he added.

(Reporting by Makiko Yamazaki; Editing by Jacqueline Wong and Kim Coghill)