50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

Japan ruling party executive urges BOJ to clarify rate-hike resolve, Nikkei says

Published 07/22/2024, 05:28 AM
Updated 07/22/2024, 06:30 AM
© Reuters. FILE PHOTO: LDP Secretary-General Toshimitsu Motegi delivers a speech during the Liberal Democratic Party convention on March 17, 2024, in Tokyo, Japan.    Rodrigo Reyes Marin/Pool via REUTERS/File Photo
USD/JPY
-
JP225
-

By Leika Kihara

TOKYO (Reuters) - The Bank of Japan should more clearly indicate its resolve to normalise monetary policy, including through steady interest rate hikes, senior ruling party official Toshimitsu Motegi was quoted as saying by the Nikkei newspaper on Monday.

"Excessive yen declines are clearly negative for Japan's economy," Motegi, who is secretary-general of the ruling Liberal Democratic Party, was cited as saying by Nikkei.

To arrest such unwelcome yen falls, the BOJ should clearly communicate its intention to shift away from massive stimulus, Motegi said.

He also said Japanese firms can probably swallow the impact of tighter monetary policy, Nikkei reported.

The remarks came ahead of the BOJ's two-day policy meeting that ends on July 31, when the board will likely debate whether to raise interest rates from current near-zero levels.

They also follow last week's comments by Prime Minister Fumio Kishida that the BOJ's policy normalisation would support Japan's transition to a growth-driven economy.

Many economists expect the BOJ to hike interest rates to 0.25% this year, though they are divided on whether that will happen this month or later.

At the July meeting, the BOJ is scheduled to announce a detailed plan for tapering its huge bond buying and scaling back a $5 trillion balance sheet. A rate hike in July could cause a huge market reaction if accompanied by a big taper plan, analysts say.

The weak yen has been a headache for Japanese policymakers as it hurts consumption by pushing up the cost of raw materials and fuel imports.

© Reuters. FILE PHOTO: LDP Secretary-General Toshimitsu Motegi delivers a speech during the Liberal Democratic Party convention on March 17, 2024, in Tokyo, Japan.    Rodrigo Reyes Marin/Pool via REUTERS/File Photo

The government is suspected of having intervened in the currency market to prop up the yen this month, which could pile pressure on the BOJ to do its part to slow the currency's fall, such as by dropping more hawkish signals, some analysts say.

The BOJ ended negative interest rates and bond yield control in March, a landmark shift away from a decade-long radical stimulus programme. But the decision has failed to reverse the yen's downtrend, as markets are focusing on the still-wide interest rate differential between Japan and the United States.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.