Makoto Sakurai, former director of the Bank of Japan, stated that considering the market turbulence caused by the recent interest rate hike (known as "Black Monday") and the low possibility of rapid economic recovery in Japan, the Bank of Japan will not be able to raise policy rates again this year.
In the latest interview, he said, "At least for the rest of this year, they won't raise interest rates again. It's hard to say whether they can raise interest rates before March next year
The recent market turbulence and the response of the Bank of Japan have made market participants wary of the outlook. The pricing in the money market shows that the possibility of the Bank of Japan raising interest rates within the year has significantly decreased. Vice Governor of the Bank of Japan, Maki Uchida, also promised not to raise interest rates during market instability.
After making the above remarks, Seamus Mac Gorain, the global head of interest rates at JPMorgan Chase, said that this means the next rate hike by the Bank of Japan may have to wait until next year.
They (the Bank of Japan) may carry out a series of interest rate hikes, but this will depend on a relatively mild global background. Obviously, the Bank of Japan will not take action until the market stabilizes. And whether the market is stable or not, of course, depends on whether the US and global economy can avoid recession, "he said.
Sakurai Makoto pointed out, "In the process of restoring normal monetary policy, they have decided to shift from an almost zero world to a normal 0.25%, which is a good thing. However, this move requires too much energy, so they should wait and see for a period of time to determine whether to further raise interest rates
At the end of July, the Bank of Japan unexpectedly announced a rate hike, triggering an epic "tsunami" in the global market. With the widespread liquidation of yen arbitrage trading, not only has the financial market in Japan, including Japanese bonds, yen, and even Japanese stocks, suffered a "bloodbath", but there has also been a linkage effect, and the stock markets of many countries such as the United States and South Korea are also in distress.
In this context, the Bank of Japan's external communication has been closely monitored. Sakurai Makoto criticized President Kazuo Ueda's tough tone regarding further interest rate hikes.
He explained, "Kazuo Ueda did not control the situation well. The Bank of Japan is shifting from excessive monetary easing to appropriate monetary easing, and the biggest problem is that Kazuo Ueda has not firmly conveyed that they will continue to maintain loose policies. This is the condition they have always maintained. Without such wording, Kazuo Ueda ultimately gives the impression that he will 'continuously raise interest rates'
Academic economists are often too straightforward because the answer can be found in numbers. However, 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 will celebrate the Obon Festival, which is a period used by the Japanese to commemorate their ancestors. Although there is no arrangement for Bank of Japan officials to speak publicly, the government plans to release the second quarter gross domestic product (GDP) data on Thursday. Analysts expect the data to rebound after contraction.