Former Bank of Japan Deputy Governor Masazumi Wakatabe said the central bank could raise interest rates if inflation expectations continue to rise and push up underlying price pressures, but warned that another hike this year would be hard to justify given weak economic momentum.
In an interview with Reuters, Wakatabe—long seen as a monetary policy dove—endorsed the BOJ’s cautious approach to normalisation, saying rate hikes should depend on steady economic improvement and a sustainable path to the 2% inflation target. He pointed to soft data, a stagnating labour market, and the risk of negative third-quarter GDP, suggesting little case for tightening at the December policy meeting.
While noting the BOJ must coordinate closely with the government of incoming prime minister Sanae Takaichi, he said the bank need not keep rates low simply to finance fiscal spending. “If inflation expectations rise and push up underlying inflation, the BOJ can raise interest rates — it needs to do so to prevent overheating,” he said.
Wakatabe, who served as deputy governor until 2023 and remains close to Takaichi, said the bank has made no commitment to a specific timetable for further hikes. The yen recently hit an eight-month low after markets interpreted Takaichi’s leadership win as reducing the likelihood of near-term tightening.
This article was written by Eamonn Sheridan at investinglive.com.
