Ex-BOJ chief Kuroda backs more rate hikes, his former deputy urges caution
Former Bank of Japan governor Haruhiko Kuroda supports further interest rate increases, while his ex-deputy Masazumi Wakatabe warns against premature moves. Kuroda's new book advocates gradual tightening, whereas Wakatabe's publication stresses the need to focus on demand growth and avoid hasty hike
Former Bank of Japan (BOJ) governor Haruhiko Kuroda has voiced support for further interest rate increases, according to his new book published this month. Kuroda, who led the central bank for a decade until 2023, said he expects the BOJ to consider raising rates by 25 basis points at each policy meeting to bring them closer to levels considered neutral for the economy.
His views contrast with those of his former deputy, Masazumi Wakatabe, whose book published in September urged caution. Wakatabe, who served as deputy BOJ governor from 2018 to 2023, warned against premature rate hikes and said policymakers should remain focused on boosting demand. He is seen as a candidate to succeed incumbent governor Kazuo Ueda when his term ends in 2028.
Kuroda, a key architect of former premier Shinzo Abe's reflationist 'Abenomics' policies, said that moving too slowly on rate hikes could prevent Ueda from completing policy normalisation. However, he acknowledged that raising rates too hastily could cause economic stagnation. Kuroda deployed a radical stimulus programme in 2013 with a pledge to reach the BOJ's 2 per cent inflation target in two years, but the target proved elusive throughout his term.
The BOJ has raised rates several times, including in September to a 31-year high of 1.25 per cent. It is expected to declare victory on Friday in its 14-year effort to meet its price target. Ueda steered an exit from Kuroda's stimulus in 2024 as a tight job market and rising raw material costs from the Ukraine war lifted consumer inflation.
Wakatabe, who has close ties to Prime Minister Sanae Takaichi and sits on a key government economic panel, said real economic growth remains low in Japan. He noted that half of the country's price rises are driven by cost-push factors, not demand. 'The BOJ would need to do quite some explaining if it were to raise rates when real economic growth is negative and price rises are driven mostly by cost-push factors,' he wrote in his book.
A rate hike may become possible if Takaichi's spending plans and growth strategies stimulate investment and fund demand, thereby pushing up Japan's neutral rate, Wakatabe said.