Professor Noguchi Akira (野口 旭), who served on the Bank of Japan's Policy Board, forecast that economic stimulus is no longer necessary and that the benchmark interest rate is likely to be raised to 1.50% in December. The comments suggest a shift from his previous position of supporting accommodative policy.
Professor Noguchi Akira (野口 旭) pointed out that underlying inflation has approached the Bank of Japan's 2% target and settled at a level consistent with the rate of wage growth, expressing the view that implementing policies to boost demand would entail excessive risk. He indicated that reflationary policy can no longer fulfill its role in Japan.
The Bank of Japan had continued its accommodative policy, but implemented consecutive rate hikes in June and September as inflationary pressure intensified due to rising energy prices and yen depreciation. Professor Noguchi analyzed that the Bank would have to accelerate the pace of rate hikes to avoid a recession while preventing the yen from weakening beyond ¥160.
He forecast that, depending on developments in the US, the BOJ's policy rate could rise to 1.75% or, in some cases, to 2%. While some believe the economy could withstand a rate of 1.75%, the assessment is that reaching 2% would have a significant impact on households and companies.
He also called for a change in the basic direction of fiscal policy, saying that expansionary fiscal policy should be restrained now that the GDP gap has turned positive. He pointed out that expansionary fiscal policy suppresses private investment and that excessively low interest rates lead to yen depreciation.