Interest rates

Raising interest rates now is undesirable

Haruhiko, Governor of the Bank of Japan (BoJ) 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 the labor productivity rate in Japan is estimated at around 1%, wages need to increase by around 3% for inflation to reach our 2% target in a sustained and stable manner.

I’m not saying the BoJ can’t raise interest rates indefinitely; Rather, I am saying that it would be inappropriate to raise rates now given current economic conditions and prices.

The new capitalism policy will have no immediate impact on the BoJ.

It will be difficult to reach the 2% target if nominal wage growth is not robust.

If the price target is reached, the BoJ could normalize its monetary policy, increasing the cost of financing public debt.

The measures taken by the government to boost potential growth in Japan will help maximize the effect of monetary easing.

It is important that wage increases extend to permanent employees working in small and medium-sized enterprises.

Very important for the exchange rate to move in a stable way, reflecting the fundamentals.

Our macro-model estimates show that yen weakness has a positive impact on net exports, GDP, but the benefits are uneven across sectors and entities.

The recent sharp and unilateral declines in the yen are absolutely undesirable.

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