According to Katsunobu Kato, a government party spokesman, Japan has established the necessary conditions to stabilize its monetary policy. In an interview with Reuters, he reaffirmed the political willingness to adjust interest rates.
Kato emphasized the importance for the Central Bank of Japan to consider the economic landscape and collaborate with the government in managing rate adjustments.
"Japan is transitioning from a period of stagnant prices and wages to one of growth," noted Kato, a seasoned ruling party figure and former Chief Cabinet Secretary, prompting speculation among analysts about his potential as a future prime minister.
Kato suggested a return to the original monetary policy, advocating for interest rates to be in the positive range and reflective of market dynamics. He emphasized the importance of assessing the country's economic conditions, particularly consumption levels, which can be variable.
Regarding the weak yen, Kato expressed more concern about its impact on inflation rather than its exchange rate. He highlighted the public's experience of rising inflation over the past two years, attributing it partly to the weak yen and contributing to the government's focus on addressing the increasing cost of living. This situation could prompt further interest rate hikes by Japan's central bank.
In March, Japan's central bank ended an eight-year period of negative rates, aiming to support inflation reaching its 2% target with the help of rising wages. Subsequently, the central bank has hinted at the likelihood of further rate increases later in the year, strengthening market expectations of forthcoming rises in borrowing costs.
Kato highlighted that a weak yen escalates the expenses associated with imported goods, thereby dampening consumption and posing challenges for policymakers aiming to support a delicate economic rebound.
He urged Japan to rejuvenate its economy by drawing foreign investments, underscoring the trend of numerous Japanese companies relocating production abroad. Additionally, he noted that the weakening yen is not as effective in bolstering exports as it was previously.
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