Shigeru Ishiba, a prominent contender for Japan’s upcoming prime ministerial election, expressed support for the Bank of Japan’s (BOJ) gradual interest rate increases. He believes this shift in monetary policy could lower prices and enhance industrial competitiveness.
“The BOJ is on the right track by aligning with global trends towards positive interest rates,” Ishiba, a senior member of the ruling party, stated in an interview with Reuters.
“While the negative impacts of rate hikes, such as stock market volatility, are being emphasized, we should also acknowledge their benefits, like reducing import costs and boosting industrial competitiveness,” he added.
Japan’s ruling Liberal Democratic Party (LDP) will hold a leadership election in September. Ishiba, who has run for the party’s presidency four times, has not yet officially announced his candidacy but consistently ranks high in public opinion polls on future prime ministers.
His comments came after the BOJ’s recent decision to raise interest rates, which unsettled financial markets. On Monday, Japan’s Nikkei stock average experienced its most significant drop since October 1987 due to concerns about higher rates and fears of a U.S. recession, though it recovered most of the losses by Tuesday.
“Japan’s economy relies heavily on domestic demand,” Ishiba noted, with exports constituting just one-fifth of the gross domestic product. “While some export-focused companies benefit from the weaker yen, most people are more affected by higher prices due to the weak currency.”
Ishiba mentioned that the general consensus places the ideal yen range at 110-140 per dollar, but he did not disclose his views on preferred currency levels. As of early Wednesday, the yen was trading around 144 to the dollar.
He emphasized that higher interest rates would enable market mechanisms to function more effectively by redirecting capital to companies with robust growth, ultimately enhancing Japan’s industrial competitiveness.
Ishiba has been a longtime critic of former BOJ governor Haruhiko Kuroda’s aggressive monetary stimulus, which was a key component of former Prime Minister Shinzo Abe’s “Abenomics” strategy to stimulate economic growth.
As Japan prepares for a special parliamentary session later this month to address the recent market turmoil, where BOJ Governor Kazuo Ueda is expected to attend, Ishiba urged the central bank to explain the advantages of higher interest rates to the public.
He acknowledged that it would take time for the benefits to become apparent, stating, “There will be a delay before the yen strengthens and import prices decrease.”
Ishiba refrained from commenting on the extent to which the BOJ should raise rates, emphasizing that political considerations should not influence the central bank’s monetary policy.
