Japanese Liberal Democratic Party member Taro Kono: The Bank of Japan should raise interest rates to stabilize the yen and control inflation
Taro Kono, a member of Japan's Liberal Democratic Party, has called on the Bank of Japan to raise the benchmark interest rate to stabilize the yen and control inflation. He pointed out that political uncertainty affects economic policy, and if the central bank delays interest rate hikes, inflation will persist, leading to rising prices for imported goods. Kono also criticized the practice of supporting voters through cash handouts, arguing that the core issue lies in the excessively low interest rates. The exchange rate of the yen against the US dollar is approximately 147.35, below the five-year average. The Liberal Democratic Party will hold a leadership election, and Kono is considering running
According to the Zhitong Finance APP, Taro Kono, a member of the Japanese Liberal Democratic Party and former Minister of Digital Transformation, stated on Tuesday that given the political uncertainty casting a shadow over the economic policy outlook, the Bank of Japan should raise the benchmark interest rate to support the yen and curb inflation.
Kono said, "We need to stabilize the yen exchange rate. To do this, the Bank of Japan needs to raise interest rates." He added, "If the Bank of Japan delays raising interest rates, I believe it will mean that inflation will persist, and the prices of all the goods we import will rise."
Just a few days before Kono's remarks, Japanese Prime Minister Shigeru Ishiba decided to resign, raising doubts about the economic policy outlook. Some economists believe the Bank of Japan may delay raising interest rates, while others express concerns about potential fiscal stimulus measures. Kono criticized the idea of consolidating voter support through cash handouts, stating that it would exacerbate the deficit.
He stated, "This is not effective. The core issue is that interest rates are too low."
On Tuesday morning, the yen was trading at approximately 147.35 yen to 1 US dollar, down from the five-year average level of about 133.61 yen to 1 US dollar.
The Liberal Democratic Party is preparing to hold a leadership election as early as next month to select a successor to Ishiba, who will compete for the position of Prime Minister.
One of the leading candidates, Sanae Takaichi, has called for continued monetary easing and expanded fiscal stimulus, raising concerns about Japan's debt sustainability and putting pressure on ultra-long-term bond yields.
The market generally expects the Bank of Japan to maintain interest rates at its policy meeting on September 19.
When asked if he plans to participate in the Liberal Democratic Party leadership election, Kono stated that he is "still considering." In the last election, he was one of nine candidates and ultimately ranked eighth; in the 2021 election, he finished second, just behind Fumio Kishida.
The Liberal Democratic Party will hold a meeting later on Tuesday to decide on the timing and format of the election. The party may choose a full voting method, which includes all members, including lawmakers and grassroots members; or it may opt for a simplified process, allowing only members of Congress and a few regional representatives to vote.
Regarding trade issues, Taro Kono criticized the recent negotiations of the US-Japan tariff agreement. He stated, "This tariff issue has been wrong from the beginning." He also pointed out that even if the US agrees to reduce tariffs from 25% implemented in April to 15%, these tariffs are still far above previous levels
