BOJ shall weigh rate hikes with caution

Japan’s incoming Minister for Economic Revitalisation, Ryosei Akazawa advised the Bank of Japan (BOJ) to be cautious while considering raising interest rates further to effectively combat deflation.

“I want the BOJ to judge things with caution,” Akazawa said. “We absolutely mustn’t do anything to cool the economy in any way for the time being. My thinking is that defeating deflation should be the top priority.”

Akazawa, a close ally of new Prime Minister Shigeru Ishiba, shared his views with reporters following the announcement of Ishiba’s Cabinet.

Akazawa’s comments support the idea that Ishiba’s government is not currently pursuing further policy normalisation, following Ishiba’s recent statement that it is not the right time to discuss additional rate hikes.

This reinforces the belief among market participants that the central bank is unlikely to raise interest rates at the end of the month.

In a signal that the new administration may prioritise boosting economic support over policy normalisation ahead of an upcoming election, Finance Minister Katsunobu Kato suggested that a supplementary budget will be prepared.

Attribution: Bloomberg

Subediting: Y.Yasser