BoJ’s Kuroda: Raising interest rates now is not desirable
Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Friday, “raising interest rates now is not desirable.”
Additional comments
It is true that the CPI data shows significant price increases.
If Japan’s labor productivity rate is estimated to be around 1%, wages must rise by about 3% for inflation to reach our 2% target in a sustained and stable manner.
I am not saying that the BoJ cannot raise interest rates indefinitely; rather, i am saying that raising rates now would be inappropriate in light of current economic and price conditions.
The new capitalism policy will not have an immediate impact on BoJ.
It will be difficult to meet the 2% target unless nominal wage growth is robust.
If the price target is reached, the BoJ may normalize monetary policy, raising the cost of financing government debt.
Government steps to boost Japan's potential growth will help maximise the effect of monetary easing.
Important for wage hikes to spread to permanent employees working at small, mid-sized firms .
Very important for forex rate to move stably reflecting fundamentals.
Our macro-model estimates show weak yen has positive impact on net exports, gdp but the benefits are uneven among sectors, entities.
Recent sharp, one-sided yen declines are absolutely undesirable.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
