Boj Hint At More Rate Hikes

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Boj Hint At More Rate Hikes

Bank Of Japan (Boj) Policymakers Hint At Moderate Rate Hikes Pace

According to Adachi from the Bank of Japan (BoJ), the central bank should adopt a very moderate pace when it comes to rate hikes. Also, the Bank of Japan (BoJ) should avoid any moves to prematurely hike the rates as it would lead to a further rise in Japanese Yen (JPY).

Adachi added that global demand is facing a slowdown, which could affect wage growth and inflation. In short, Adachi made it clear that any sudden rate hikes could effect the inflation, Yen's value, and wage growth.

Boj To Adopt A Cautious Approach

The BOJ policymaker commented on how the economy is ready to let go of the ultra-lose monetary policy. After all, the prices are rising while the economy is also stable.

However, he also wanted the Japanese economy to face a lot of uncertainties, which means caution is needed. Right now, the Yen is at historic lows and any rate hikes will help it to rise from there.

Meanwhile, the rate cut cycle of the Federal Reserve is now in full swing, which will also lower the import costs of Japan. At the same time, it will also effect the consumer inflation in the country.

Another uncertainty is related to the Japanese company's decision to raise wages next year. Given the global risks and the upcoming US elections, the rise in wages may be at risk due to slow demand from the USA and China.

That's why it is important that the BoJ must scrutinize all of the risks before committing to another rate hike. These comments from Adachi showcase a neutral approach to the interest rate policy. Also, something similar was said by Ueda, which shows that the central bank is in no rush to go for another rate hike.

The interest rate in Japan is now near 0.25% as the BoJ finally ended its decades-long policy of negative rates.

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