- Fumio Kishida, the Japanese PM, backed Bank of Japan’s loose monetary policy in spite of the yen falling to a two-decade low compared to the US dollar.
- The BOJ should continue its policy, he said to the Financial Times.
- Kishida stated that BOJ Governor Haruhikokuroda’s term is not being shortened at the moment.
Japanese Prime Minister Interview with Fumio Kirshida for the Financial TimesPublished Tuesday, he stated that he supports Bank of Japan’s loose monetary policy stance despite yen sliding to a 2-decade low against US dollars.
He stated that the BOJ must maintain its policy until wages rise and encouraged companies to increase workers’ pay if they have raised prices.
Kishida said that by passing on rising costs, businesses will be able to raise wages. “Wage hikes used to be viewed as a cost factor. But in the future, companies will need to invest more in their employees to support the economy and grow their businesses.”
He indicated that the government will take steps to support companies’ wage increases, while increasing their input costs.
The majority of central banks raise interest rates to combat high inflation. However, the Bank of Japan has maintained negative interest rates and a cap on its 10-year yield through bond purchases to fight deflation.
According to the FT, economists believe that Japan may be nearing a historical inflection point after years of deflation. The global energy crisis will force businesses to increase product prices. This will create pressures that will cause workers to demand raises.
Kishida also denied rumors that he would press the central bank to stop negative interest rates and cut short Haruhiko Kuroda, BOJ Governor. He said he will continue to work closely alongside Kuroda.
Kishida stated, “At this moment, I’m not thinking about shortening his tenure.” Kuroda will be retiring after a 10-year term that ends in April 2023.
Kishida’s comments come as the yenThe dollar fell to a 24-year low earlier in the year due to the Federal Reserve’s aggressive rate hikes. This has caused US Treasury yields to soar, increasing the gap between Japanese and US government bond yields.
Tuesday’s dollar trade was at 145.65yen. Japan intervened recently on the foreign exchange market in an effort to support the slumping Japanese yen. However, its value has returned at the 145 handle, the same level it was before the intervention. Japan’s foreign currency reserves hit a five-year lowDue in part to the intervention, $1.24 Trillion
The US 10-year Treasury yieldJapan’s economy grew by 4% Tuesday, while the US was at 4% 10-year bond yieldIt hovered just above its limit of 0.25%.
Separately, Japan’s 10-year bonds were not traded for a third consecutive day, while the nine-year bond yields reached a nine-year high. Inversely, bond yields and prices change.
Japan’s 10-year bond has become more expensive as yields on other Japanese notes have increased. Kazuhiko Sanno, chief strategist at Tokai Tokyo Securities, stated that nobody is interested in trading such bonds. Yahoo Finance.
