BOJ to go slow in rate hikes after ending negative rate, says ex-central bank official By Reuters

By Leika Kihara

TOKYO (Reuters) – The Bank of Japan may end negative interest rates in April but will likely go slow in any further steps towards normalising ultra-loose monetary policy, the central bank’s former executive Eiji Maeda said on Wednesday.

With wage and price hikes broadening, Japan has already met conditions set by the BOJ for normalising monetary policy, said Maeda, a former BOJ top economist who also has experience drafting monetary policy.

“We’re clearly seeing changes in Japan’s price moves” with society shaking off a 25-year-old deflationary mindset, he told a news conference, adding that an “endogenous, sustainable” rise in inflation is kicking off.

“There’s a chance the BOJ will end (negative interest rate) in April,” if it foresees inflation staying around its 2% target through fiscal 2026, Maeda said. “This timing is the most likely, though much will depend on developments at the time.”

After ending negative rates, the BOJ will likely move slowly in rate hikes unlike the aggressive monetary tightening taken by the U.S. and European central banks, he said.

“Theoretically, there’s scope to raise short-term interest rates to 2%. But the BOJ probably wants to avoid an abrupt spike in long-term interest rates, so will probably monitor the impact of (an end to) negative rates for some time,” Maeda said.

Even if the BOJ were to end negative rates, the yen likely won’t rise much since further rate hikes will be slow, he said, adding that any rise in the yen will be limited to around 130 versus the dollar this year.

The dollar stood around 147.80 yen on Wednesday.