Former BOJ Governor Kuroda Expects More Rate Hikes in Japan

Former Bank of Japan (BOJ) Governor Haruhiko Kuroda projected that Japan is making progress towards sustainably achieving its inflation target of 2%, and as a result, the BOJ is expected to continue interest rate hikes in the coming years. Kuroda, who managed an enormous stimulus program for a decade, highlighted the growth potential of the Japanese economy in a research paper presented to the annual magazine of the House of Representatives.

Kuroda stated that despite the anticipated interest rate increases, the rising real wages will support consumption, leading the Japanese economy to grow by over 1% both this year and in the future. He provided positive signals regarding the sustainability of Japan's current economic dynamics, emphasizing that this situation will contribute to economic stabilization.

The BOJ's cautious stance continues Kuroda noted that the BOJ's fundamental stance of gradually increasing interest rates considering economic and price developments has not changed. He explained that this approach aims to keep inflation sustainably and stably at the 2% level. Emphasizing the continuation of a positive wage-inflation cycle in Japan, Kuroda said this is a significant advantage for the country's economy.

He also added that it remains uncertain how much interest rates will increase over time. Kuroda pointed out the difficulty in predicting the ideal level that would neither cool nor overheat the Japanese economy, stating that the BOJ will adopt a cautious approach during this process.

Growth expectations for the Japanese economy Kuroda expressed expectations that the Japanese economy will record growth of over 1% in 2024 and beyond. The increase in real wages, supporting consumption, is considered a critical factor enhancing growth potential. The positive trajectory of Japan's economic growth dynamics may enable the preservation of economic stability despite future interest rate hikes.

These growth expectations create a foundation for tighter steps in the central bank's monetary policy while supporting Japan's long-term economic goals. Kuroda's assessments indicate that Japan's economic structure will continue to demonstrate balanced growth under current conditions.