Interview: Ex-BOJ chief Kuroda says policy rate should be raised to around 1.5%
TOKYO (Kyodo) -- Former Bank of Japan chief Haruhiko Kuroda said the central bank's policy interest rate should be raised to a "neutral rate" of around 1.5 percent from the current 0.75 percent to address inflation.
Kuroda, 81, who had led unprecedented monetary easing measures under his "bazooka" stimulus during his 10-year tenure at the helm from 2013, said the BOJ could even shift to a tightening stance if a surge in crude oil prices intensifies inflation.
The BOJ "needs to raise (the policy rate) by 0.75 percentage point or 1 point," Kuroda said in a recent interview with Kyodo News. If the bank lifts the rate at the usual pace of 0.25 percentage point, "it could still hike the rate three or four times," he said.
Kazuo Ueda, the successor to Kuroda at the central bank, has said that it seeks to continue raising rates to normalize monetary policy as long as prices and economic activity continue to align with expectations.
"There is nothing wrong at all" if the bank decides on another rate hike at its next policy meeting in April, said Kuroda, who under his tenure as BOJ chief implemented a strategy of unconventional monetary policies aimed at endings years of deflation.
The central bank had introduced a quantitative easing program, followed later by quantitative and qualitative easing with a 2 percent inflation target, and a negative rate policy.
The rise in consumer prices driven by the weak yen and higher import costs prompted the BOJ in March 2024 to raise the key rate for the first time in 17 years, followed by further hikes in July 2024 and in January and December last year.
Reflecting on his time as BOJ chief, Kuroda said bold monetary easing steps were "necessary to beat deflation and to achieve stable growth and full employment."
Whether to shift policy to a neutral stance, which would neither stimulate nor cool the economy, is a sensitive issue under the government of Prime Minister Sanae Takaichi, a staunch supporter of aggressive monetary stimulus.
Kuroda said that the BOJ should pay close attention to crude oil prices, as they could surge further if the conflict in the Middle East drags on, causing inflation to rise more quickly.
"If the impact is serious, (the bank) may need to accelerate rate hikes or even move beyond neutral to tightening," Kuroda said.
The former BOJ governor also questioned the effects of Takaichi's aggressive fiscal policies, asserting, "There is no need at all to stimulate (the economy), which would only boost inflation" at a time when the economy is holding firm.
As for the ongoing discussions between the government, ruling and opposition parties about eliminating the 8 percent consumption tax on food items, Kuroda said consumers are no longer demanding such a tax break since rice prices are beginning to fall.
There are also no convincing plans to cover the tax revenue shortfall, he said.
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