Former BOJ Board Member Predicts December Rate Hike to 1.5 Percent

Japan may no longer need demand-stimulating policies, according to Asahi Noguchi, a former Bank of Japan (BOJ) board member and current Senshu University professor. Noguchi argued that underlying inflation is nearing the BOJ’s 2% target, and wages have stabilized at levels consistent with that price growth. He cautioned that further demand-driven policies could carry excessive risks.

The BOJ has already raised interest rates twice this year, in June and September, and Noguchi expects another hike in December. He predicts the central bank will lift its benchmark rate from 1.25% to 1.50% in December, potentially reaching 1.75% or 2% depending on future economic conditions. Noguchi noted that the BOJ prefers gradual rate increases to avoid a recession but may need to act faster to prevent the yen from weakening past 160 per dollar, a level that could trigger another surge in food prices.

While the yen is currently trading around 158 per dollar, Noguchi believes the BOJ will hold rates steady this month. He also emphasized that fiscal policy should shift away from expansionary measures, warning that excessive government spending could push up bond yields and crowd out private investment. Noguchi, once an advocate for aggressive monetary easing, has since backed the BOJ’s recent rate hikes but cautioned against moving too quickly to a 2% rate, which could shock households and businesses accustomed to ultra-low rates.