Japan political turmoil a risk for BOJ December hike, former board member says
By Divya Chowdhury
MUMBAI, Nov 1 (Reuters) -Political turmoil after Japan's ruling coalition lost its majority in a snap election last weekend could lead the Bank of Japan to delay its next interest rate hike until January, a former BOJ board member said on Friday.
"If the yen depreciates further (against the dollar), the probability of a rate hike by Bank of Japan in December will increase, but otherwise I think that January of next year could be likely," said Takahide Kiuchi, who sat on the BOJ board from 2012 to 2017.
Kiuchi told the Reuters Global Markets Forum that if dollar-yen rises above 155 and the government is forced to intervene in the currency market again, it may pressure the BOJ to hike rates to arrest further yen depreciation.
Despite various rounds of intervention in 2024, the yen fell to a 38-year low of 161.96 per dollar on July 3 and then reversed its downtrend after the BOJ's July 31 decision to raise interest rates to 0.25%.
On Friday the yen JPY= was 0.4% lower on day at 152.63, having risen on Thursday on less dovish comments from BOJ Governor Kazuo Ueda after the bank kept rates on hold.
"The BOJ's basic policy stance has not been changed," said Kiuchi, now an executive economist at Nomura Research Institute, adding that he expected the bank to reach a terminal policy rate of around 0.75% by mid-2025.
The head of the opposition party, Yuichiro Tamaki -- whom the ruling LDP is courting for support after losing its majority in the lower house -- said the BOJ should wait for at least six months before hiking interest rates.
Kiuchi believes the ruling party will have to accept the opposition party's policy stance that ultra-easy monetary policy should be maintained until wage gains increase sustainably above inflation.
"Maybe BOJ is refraining from making a comment on the political situation, but I think the political situation could be very influential for the Bank of Japan monetary policy," Kiuchi said. "That's a large risk."
(Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://lseg.group/3KFHrhe)
BOJ keeps rates steady https://reut.rs/3YKqnyA
Reporting by Divya Chowdhury in Mumbai; Editing by Hugh Lawson
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
