INTERVIEW: Ex-MOF Official Urges BOJ to Continue Rate Hikes

Tokyo, June 10 (Jiji Press)–Takehiko Nakao, a former senior official at Japan’s Ministry of Finance, has called on the Bank of Japan to continue raising interest rates. In a recent interview with Jiji Press, Nakao, former vice minister of finance for international affairs, said that the BOJ “should continue to steadily raise interest rates and normalize monetary policy.” The current excessive weakening of the yen has come as the BOJ’s monetary easing had lasted longer than necessary, he said. Nakao also expressed concern about the risk of asset bubbles, saying that stock and real estate prices as well as housing rents are surging due to ultralow interest rates. The yen is “extremely cheap,” Nakao said. The dollar is currently moving around 160 yen, about 70 yen away from the International Monetary Fund’s purchasing power parity of around 93 yen, according to Nakao. “People and importing companies have been negatively affected” by rising import prices reflecting the weak yen, Nakao said, adding, “Japanese people’s ability to buy goods and services from overseas has weakened, leading to a decline in Japan’s national power.” Nakao said that the BOJ’s unprecedented monetary easing aimed at overcoming deflation “had the effect of correcting the extremely strong yen, but the policy had side effects such as the yen’s depreciation and lax fiscal discipline as it lasted too long.” The BOJ has deferred interest rate hikes on the pretext of assessing the impact of U.S. President Donald Trump’s high tariff policy and tensions over Iran although Japan’s consumer inflation is well above the central bank’s 2 pct target, he said. Meanwhile, Nakao praised the yen-buying, dollar-selling currency market interventions worth a total of 11.7 trillion yen conducted by the Japanese government and the BOJ in April and May this year, saying they “can suppress short-term speculative foreign exchange rate movements.” He led a large-scale foreign exchange market intervention in 2011, when he was vice minister of finance for international affairs. Nakao said that the Japanese authorities would likely continue to intervene in the market if the yen keeps falling. Meanwhile, he emphasized that the BOJ needs to adjust its monetary policy to help “continuously correct the depreciation of the yen.” The BOJ last raised its target for the unsecured overnight call rate, the country’s benchmark short-term interbank lending rate, in December 2025, to around 0.75 pct from around 0.5 pct. The central bank is expected to consider raising the target to around 1 pct at its next policy meeting set for Monday-Tuesday. END [Copyright The Jiji Press, Ltd.]