Kuroda: BOJ Will Continue to Raise Interest Rates

In a recent statement, former Bank of Japan (BOJ) Governor Haruhiko Kuroda indicated that the BOJ is likely to continue raising interest rates in the coming years due to the expectation of achieving a sustainable 2% inflation target. In a research paper presented in the annual magazine of the House of Representatives published on December 24, Kuroda projected that despite anticipated interest rate hikes, the increase in real wages would support consumer spending, leading the Japanese economy to grow by over 1% this year and beyond.

"It seems there is no change in the BOJ's fundamental stance of gradually increasing interest rates, taking into account economic and price developments," Kuroda stated. He noted that this is likely due to the continuation of a positive wage-inflation cycle that could sustain inflation at the 2% target in a stable manner. Additionally, Kuroda mentioned the uncertainty surrounding how much the BOJ would eventually raise interest rates, given the difficulty in predicting a level that is neither too cooling nor overheating for the Japanese economy.

Kuroda added that higher borrowing costs are unlikely to harm firms significantly, as they hold ample cash reserves, while households would reap "substantial gains" from the rising interest paid on their large savings. He emphasized that due to the increasing cost of financing Japan’s massive public debt, the government might bear the brunt of the pain.