BOJ must raise rates if firms continue to spend, says board member Takata By Reuters
Written by Leika Kihara
KANAZAWA, Japan (Reuters) – Bank of Japan board member Hajime Takata said on Thursday the central bank must keep raising interest rates if it is to ensure companies continue to raise spending and wages.
“The stock market and currency saw a lot of volatility at the beginning of August and the fall continues. Therefore, we need to take a closer look at the market developments and their impact at the moment,” said Takata in his speech to business leaders in the city of Kanazawa.
“If inflation moves roughly in line with forecasts, and companies continue to increase spending, wages and pass costs through inflation, we will have to adjust the rate of inflation,” he said.
The BOJ ended negative interest rates in March and raised short-term rates to 0.25% in July on the assumption that the economy was making progress toward achieving its 2% inflation target.
BOJ Governor Kazuo Ueda has indicated that the bank is ready to raise interest rates if inflation stays around 2% in the coming years coupled with strong wage gains, as the board is currently doing.
While the central banks of the US and Europe are considering or moving towards reducing rates, the impact of their aggressive monetary tightening in the past may appear to be slow and moderate in the Japanese economy, Takata said.
Differences in the stance of monetary policy between that of the BOJ and other central banks can also cause market disruptions, Takata said. “Therefore, we must carefully monitor what is happening in this country and overseas at the moment,” he said.
