The Governor of the Bank of Japan, Haruhiko Kurodadeclared on Friday that “raising interest rates now is not desirable“.
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It is true that the CPI data shows a significant increase in prices.
If Japan’s labor productivity rate is estimated to be around 1%, wages need to rise by around 3% for inflation to reach our 2% target on a sustained and stable basis.
I’m not saying that the BoJ can’t 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 the BoJ.
It will be difficult to meet the 2% target unless nominal wage growth is strong.
If the price target is met, the BoJ could normalize monetary policy, raising the cost of financing government debt.
Government measures to boost Japan’s growth potential will help maximize the effect of monetary easing.
It is important that salary increases be extended to permanent employees of small and medium-sized companies.
It is very important that the exchange rate moves in a stable manner reflecting the fundamentals.
Estimates from our macro model show that a weak yen has a positive impact on net exports and GDP, but the benefits are uneven across sectors and entities.
The recent sharp and one-sided declines in the yen are absolutely undesirable.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
