Former Currency Chief Nakao Says US Worried About Yen Weakness Weakening Japan's Economy, Expects BOJ Rate Hikes to Reach 2.25%
MacroDigital Finance
Former top currency official Takehiko Nakao, in an interview with Reuters, said the United States is concerned that excessive yen weakness is undermining Japan's economy. Nakao said Washington clearly believes the Bank of Japan is too slow in raising interest rates, because rising Japanese government bond yields could spill over into US Treasury yields. He said that to correct the weak yen, it is possible the BOJ will raise rates at every policy meeting until real interest rates turn positive from negative, and that there is no need to limit each hike to 0.25%. He predicted the terminal rate could rise to around 2.25%. July's core CPI rose 1.8% year on year, but excluding the 0.23 percentage point downward effect from gasoline subsidies, it exceeded 2%, and Nakao said it would not be surprising for the policy rate to be raised from the current 1.0% to around 2.25%. He analyzed the July joint US-Japan currency intervention as a clear message from the US side that Washington also worries about Japan's excessive yen weakness.
