Former BOJ Policymaker Asahi Noguchi Calls for End to Low Rates

Former Bank of Japan (BOJ) board member Asahi Noguchi has declared that Japan no longer needs expansionary fiscal and monetary policies aimed at stimulating demand. In an interview with Reuters, Noguchi, who served until March, predicted another interest rate hike by the BOJ in December. His comments reflect a broader shift in perspective among former advocates of loose monetary policy, driven by years of rising inflation and wages.

Noguchi noted that underlying inflation is near the BOJ’s 2% target, and wages are aligning with that level. He warned that implementing policies to boost demand at this stage would be too risky. The BOJ has already raised rates in June and September, accelerating its pace due to energy price shocks and a weak yen. Noguchi suggested that the BOJ may lift rates to 1.5% by December, potentially reaching 1.75% or even 2% depending on global economic conditions.

The weak yen has become a major concern, as it increases import costs and heightens the risk of further yen intervention. Noguchi emphasized that the BOJ must balance cautious policy normalization with the need to prevent excessive yen depreciation. He also criticized excessive fiscal spending, arguing that it could push up bond yields and discourage corporate investment.

Noguchi, once a reflationist advocate of aggressive monetary easing, now believes that reflationary policies are no longer necessary for Japan. He warned that excessively loose fiscal policy could crowd out private investment and further weaken the yen. His perspective underscores the evolving economic landscape in Japan as inflation and wages continue to rise.