This report focuses on the news that the Bank of Japan raised its policy rate to around 1.25%, and examines the Fed’s moves and the views of a former IMF official. It also considers efforts to correct the yen’s weakness and the path for future rate hikes.
The Bank of Japan announced on the 18th its decision to raise its policy rate to around 1.25%. The Fed had raised rates on the 16th, putting downward pressure on the yen exchange rate, so attention focused on the Bank of Japan’s additional response from the perspective of correcting the yen’s weakness.
Desmond Lachman (デズモンド・ラックマン), a former IMF Deputy Managing Director with expertise in macroeconomics, described the Bank of Japan’s latest rate hike in an interview as a step toward correcting the yen’s weakness, while also indicating that further rate increases may be necessary.
Looking ahead, in light of the possibility that the Fed could raise rates again this year, the report presented the view that the Bank of Japan needs to accelerate its rate-hike pace from the previous once-every-six-months schedule. It also pointed to changes in the economic environment, including persistently high crude oil prices amid worsening conditions in the Middle East, and said that the ultimate destination remains uncertain.