 "Bank of Japan, BOJ")
Bank of Japan Governor Kazuo Ueda highlighted some potential positives of raising interest rates under normal economic conditions.
Bank of Japan Governor Kazuo Ueda highlighted the potential positive aspects of raising interest rates under normal economic conditions, while reiterating his commitment to patiently continue monetary easing in pursuit of a stable inflation.
“The most obvious benefit of a slightly positive inflation rate is greater room for monetary policy to maneuver in the event of an economic downturn,” Ueda said in a speech Monday at a conference hosted by the Keidanren, Japan’s largest business lobby, in Tokyo.
 "Kazuo Ueda")
Kazuo Ueda (Photo: Bloomberg)
“I believe that greater economic stability resulting from room to maneuver for monetary policy responses will have a significant positive effect on businesses in formulating their business plans,” the governor said in his latest public address planned for this year.
Although Ueda stopped short of giving clear guidance on the timing of a possible policy change, he joined his deputy Ryozo Himino in highlighting some of the benefits that would come from a world without negative rates, including improved net incomes. of interests.
 "Japan inflation graph")
Graph of inflation in Japan (Photo: Bloomberg)
Ueda is heading into another pivotal year as two-thirds of economists forecast the first rate hike since 2007 by April. Some 15% expect it to take place next month.
Ueda said some have argued that prices and wages would stop growing if price pressure from imports eased, but he was more optimistic. He hopes that “this time, the Japanese economy will emerge from the context of low inflation and manage to create a virtuous circle between wages and prices,” he said.
The central bank maintained the world’s last negative rate at a policy meeting last week. Ueda said Monday that a key point to watch is whether wages will continue to rise “markedly” during annual salary negotiations in the spring of next year.
The first outcome of wage negotiations will be expected in March, which largely explains why half of economists surveyed by Bloomberg envision an end to sub-zero rates in April – although Ueda has not directly ruled out action sooner .
If “the probability of achieving the 2% price stability target in a sustainable and stable manner increases sufficiently, the bank will likely consider changing its monetary policy,” Ueda said.
First publication: December 25, 2023 | 11:26 p.m. STI
