Interest rate hike after negative interest rate is lifted, decision based on economic situation = Bank of Japan member Takada | Reuters

2024-02-29 07:13:31

On February 29, Bank of Japan Councilor Hajime Takada announced at a press conference following the Shiga Prefecture Financial and Economic Council meeting that the Bank of Japan intends to maintain an accommodative financial environment even following the negative interest rate is lifted. The photo was taken in January last year in front of the Bank of Japan head office (2024 Reuters/Issei Kato)

Otsu City, May 29 (Reuters) – At a press conference held on the 29th following the Shiga Prefecture Financial and Economic Council Meeting, Bank of Japan Councilor Hajime Takada expressed the intention of maintaining an accommodative financial environment even following the negative interest rate is lifted. Even though real interest rates are in negative territory, he said, “This does not mean we are going to keep raising interest rates,” and said that they will review the policy at each monetary policy meeting and respond in accordance with the economic situation. He did not specify whether negative interest rates would be lifted in March or April.

In his morning address, Commissioner Takada stated that although there was economic uncertainty, “we are finally in a situation where we can see the achievement of the 2% inflation target.” See more .

At the press conference, he said, “Maybe it would be a good idea to step down a notch a little bit” from the current “very strong monetary easing.” “This is just a gear shift, not a reversal,” he said, adding that a certain amount of monetary easing is necessary and that it is important to avoid policy discontinuities.

At a monetary policy meeting in March, when asked if he would support lifting negative interest rates if the executive committee proposed, he said, “I would like to be there and think regarding it myself.” He explained that he would consider measures to take, taking into consideration additional material that would emerge before the decision meeting.

Commissioner Takada stated that real interest rates are “in a fairly negative range,” but regarding the path to raising interest rates following negative interest rates are lifted, he said, “Rather than having a target and responding mechanically, we will have to respond to the actual environment. It all comes down to thinking regarding what the standard should be every time.”

Regarding the exit strategy, Commissioner Takada said, “It is important not to make it too complicated.” He said that it will be important to disseminate information on the degree of monetary easing and the policy menu and explain the Bank of Japan’s finances in the event that it is foreseeable that the price target will be achieved.

However, he said there is “no particular order” to the exit strategy, and that the order and package will depend on the situation. In his speech, he stated that “it is necessary to consider agile and flexible responses,” including an exit response, but he explained that he did not have any specific policy in mind.

(Takahiko Wada)

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