news

Cailianshe News, August 12 (Editor: Huang Junzhi)Makoto Sakurai, a former Bank of Japan board member, said the Bank of Japan will not be able to raise its policy rate again this year given the market turmoil following the central bank's recent rate hike, known as "Black Monday," and the low likelihood of a quick recovery in Japan's economy.

“At least for the rest of this year, they won’t raise rates any more,” he said in a new interview. “Whether they can raise rates before March next year is hard to say.”

Recent market turmoil and the Bank of Japan's response have made market participants wary of the outlook. Money market pricing shows that the probability of the Bank of Japan raising interest rates this year has dropped significantly. Bank of Japan Deputy Governor Shinichi Uchida also pledged not to raise interest rates when the market is unstable.

JPMorgan ChaseSeamus Mac Gorain, global head of rates, said after Uchida's comments that this meant the Bank of Japan's next rate hike might not come until next year.

"They (the Bank of Japan) may do a series of rate hikes, but that will depend on a fairly benign global backdrop. It's clear that the Bank of Japan won't act until markets stabilize. And whether markets stabilize or not, that of course depends on whether the U.S. and global economies can avoid a recession," he said.

Makoto Sakurai pointed out that "in the process of returning to normal monetary policy, they decided to move from a world of almost zero to a normal 0.25%, which is a good thing. But this move requires too much energy, so they should wait for a while to judge whether to raise interest rates further."

At the end of July, the Bank of Japan unexpectedly announced an interest rate hike, triggering an epic "tsunami" in the global market. With the large-scale liquidation of yen carry trades, not only did the financial markets in Japan, from Japanese bonds, yen to Japanese stocks, suffer a "bloodbath", but also a linkage effect occurred, and the stock markets of many countries such as the US and South Korean stocks were also in mourning.

Against this backdrop, the Bank of Japan's external communications have come under close scrutiny, with Makoto Sakurai criticizing Governor Kazuo Ueda's tough tone on further rate hikes.

He explained, "Ueda Kazuo did not control the situation well. The Bank of Japan is moving from excessive monetary easing to appropriate monetary easing, and the biggest problem is that Ueda Kazuo failed to firmly communicate that they will continue to maintain the accommodative policy. This is the condition they have been keeping. Without such wording, Ueda Kazuo ended up giving the impression that he would 'keep raising interest rates'."

"Academic economists tend to be too straightforward because the answers can be found in the numbers. But the real economy is not that simple. Therefore, the authorities also need to explore appropriate ways to deal with reality," he added.

This week, Japan marks the Obon festival, a time when Japanese people honor their ancestors. While Bank of Japan officials are not scheduled to speak publicly, the government plans to release second-quarter gross domestic product data on Thursday, which analysts expect to rebound after a contraction.