Japan’s incoming prime minister, Shigeru Ishiba, has signaled that the country’s monetary policy will continue to be accommodative. This means that interest rates will remain low to support a fragile economic recovery. Ishiba made this statement on Sunday, hinting that the Bank of Japan should maintain its current course.
This stance is noteworthy, as Ishiba had previously been a vocal critic of the Bank of Japan’s aggressive monetary easing policies in the past. However, his remarks suggest a shift towards a more dovish approach, indicating a willingness to keep borrowing costs low.
When asked about the possibility of further interest rate increases by the central bank, Ishiba stated, “It’s something the Bank of Japan, which is mandated to achieve price stability, will decide while working closely with the government.” He added, “From the government’s standpoint, monetary policy must remain accommodative as a trend given current economic conditions.”
Ishiba’s stance is likely to impact the Bank of Japan’s future monetary policy decisions. The bank recently ended negative interest rates in March and raised short-term borrowing costs in July, marking a shift away from a decade-long, radical stimulus program.
However, BOJ Governor Kazuo Ueda has indicated a willingness to raise rates further if Japan makes progress towards achieving the bank’s inflation target of 2%.
While Ishiba has acknowledged the importance of achieving price stability, he has also emphasized the need to prioritize a full exit from deflation and has expressed concern about weak signs in consumption. He has stated that Japan must continue to prioritize making a full exit from deflation.
In addition to monetary policy, Ishiba has also announced plans to implement a fiscal package to address rising living costs and help low-income households. This package is expected to be implemented in the near future.
Ishiba’s victory in the Liberal Democratic Party’s presidential election marks a shift in Japan’s political landscape. His stance on monetary policy and economic recovery will be closely watched by investors and analysts alike. His plans for fiscal stimulus and his emphasis on addressing rising living costs will likely shape Japan’s economic agenda in the coming months.
