Japan’s new Economy Minister Ryosei Akazawa said Tuesday that the government has confidence in the central bank’s decision on when to raise interest rates again, amid uncertainty over the new political leadership’s preference for loose monetary policy.
Bank of Japan Governor Kazuo Ueda said the central bank will adjust the degree of monetary support if the economy and prices move in line with its forecasts, Akazawa said.
The chairman of the monetary authority also said that the central bank can afford to take time to examine market developments and that, according to Akazawa, real interest rates remain deeply in negative territory.
“Specific monetary policy decisions are under the jurisdiction of the Bank of Japan,” he told a news conference.
“We trust the Bank of Japan’s decision on how to adjust the degree of monetary support based on economic and price developments,” Akazawa said in an interview, putting aside the view that the new government would counteract the bank’s efforts aimed at normalizing political monetary policy.
Japan’s new Prime Minister Shigeru Ishiba surprised markets last week when he said the economy was not ready for further interest rate hikes, an apparent reversal from his earlier support for the central bank, which was withdrawing decades of extreme monetary stimulus.
Akazawa said the government’s top priority will be to strengthen the economy so that it does not slip back into deflation.
“Japan is about to experience rising inflation accompanied by solid wage increases, although we are not at that point yet,” with inflation-adjusted real wage growth still stable, he said.
Source: Terra
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