Ex-BOJ chief urges rate hikes, warns on Japan spending

Former Haruhiko Kuroda, who led Japan’s central bank for a decade, called for continued interest rate increases and tighter fiscal policy, warning that Premier Sanae Takaichi’s proposed spending could overheat the economy.

In an interview, Kuroda said Japan’s economy is in “great shape” with solid growth and rising wages, making gradual rate hikes toward a neutral level appropriate. He suggested the Bank of Japan could raise rates roughly twice per year in 2026 and 2027 if the economy sustains its momentum, News.Az reports, citing Reuters.

Kuroda warned that large spending programs and tax cuts aimed at easing living costs could be counterproductive, potentially fueling inflation and pushing up bond yields. He emphasized that while supporting innovation is constructive, expansionary fiscal measures targeting short-term relief risk undermining monetary normalization.

On the currency front, Kuroda noted that the yen may be “somewhat too weak” relative to economic fundamentals, and that while interventions could temporarily stabilize the currency, they are unlikely to provide lasting effects.

Reflecting on his decade of radical stimulus under “Abenomics,” Kuroda said that Japan no longer needs the shock-therapy communication style he once used to convince the public that prices would rise after years of deflation. Instead, a low-profile approach to gradual rate increases is now appropriate, and he praised current BOJ Governor Kazuo Ueda for his measured communication.

Kuroda’s remarks highlight a shift in policy thinking as Japan transitions from decades of deflation-fighting stimulus to a phase of normalization amid solid economic growth and persistent inflation above target.

News.Az 

By Aysel Mammadzada