Bank of Japan Governor Ideas: Updated Aug. 2, 2024.

 

Bank of Japan chief denies rate hike would seriously damage Japan economy

Article Source:  https://mainichi.jp/english/articles/20240731/p2g/00m/0bu/051000c

Ideas:

There are always positives and negatives related to key interest rate hikes and decreases, depending on the sector or industry, and even households might react differently to rate increases.

The key interest rate increase will reduce the difference between the US rate and the Japanese rate, which has been a major reason for the weak Japanese yen.

But the Bank of Japan needs to be careful, and make sure the rate doesn't get too strong, as it might cause foreign visitors from not coming to Japan, as foreign tourism is now a major economic driver for the Japanese economy.

But its going to take many more Japanese key rate increases and or many US key rate decreases for the US rate and the Japanese rate to be near equal which makes the US dollar and the Japanese yen somewhat equal, which will help the Japanese yen to be less weak and stronger.

The 2 percent target might not be achieved anytime soon, but its still a good target to strive for as a 2 percent inflation rate is maybe a good number for the Japanese economy, as there are many senior citizens who live on fixed incomes and anytime there is an inflation increase it could significantly affect them, and of course all in the Japanese economy.

Japanese banks might feel as sense of relief as now they might be able to have higher interest rates for their borrowing situation, which means they now can make more profits instead of the zero rate that they to have for many years.

The need may exist for another rate increase sometime in the fall, but its going to depend on what happens with consumer spending and business investment spending in the future months.

If the April wage increases don't begin to affect the Japanese economy with Japanese households spending more in the summer the Bank of Japan might delay the rate increase until sometime in 2025.

The Japanese economy, while a very stable economy, with few shocks, its a very stagnant economy and doesn't really grow that much which puts a lot of pressure on the Bank of Japan, to rely on exports and foreign tourism to grow the economy, as domestic consumer spending doesn't seem to be much or not as good as it should or could be compared to the US and the EU.

Have a nice day and be safe!