INTERVIEW: Takaichi Aide Skeptical about Need for Rate Hike

Tokyo, Oct. 9 (Jiji Press)–Masazumi Wakatabe, the brains behind new Liberal Democratic Party President Sanae Takaichi’s economic policies, has expressed his skepticism about a need for an early interest rate hike in Japan. “If you ask me whether we’re in a situation requiring an interest rate hike, it’s a little different,” Wakatabe, former Bank of Japan deputy governor and current Waseda University professor, said in an interview Wednesday. He contributed an article on the economy to a book written and edited by Takaichi, who is expected to become prime minister later this month. The book was released last year. Wakatabe said that the impact of the U.S. tariff policy on the Japanese economy may have surfaced. Japan’s real gross domestic product for July-September, whose preliminary data will be announced in mid-November, “will probably show negative growth,” he said. “I wonder if it’s necessary to raise interest rates in December when economic conditions are deteriorating,” he stated, adding that if the BOJ raises interest rates, it needs to fully explain why. Wakatabe emphasized that the bank “should consider its monetary policy together with the government,” saying that it is important that the direction of fiscal and monetary policies is consistent. He also stated that a joint statement adopted by the government and the BOJ in 2013 should be reviewed when the country has completely eradicated deflation. Wakatabe attributed the dollar’s recent rise above 150 yen to fading expectations for an early interest rate hike while predicting that the U.S. currency would fall “if an aggressive fiscal policy is launched.” On the fear that fiscal expansion will damage the country’s financial health, he said, “Tax revenues are increasing and prices are rising, so the ratio of net debt to nominal GDP is falling.” “We are at a very important juncture in a complete shift from deflation to mild inflation with growth,” he continued. As BOJ Governor Kazuo Ueda, who took office in April 2023, has reached the halfway point of his five-year term, Wakatabe said, “There were cautious opinions about raising interest rates, but so far there has been no major mistake.” “I hope he will achieve a complete shift from deflation,” he added. END [Copyright The Jiji Press, Ltd.]