Political Pressure Hinders Swift End to Negative Rates
Ishiba, while emphasizing the need for an immediate halt to negative rates, acknowledged that the Bank of Japan (BOJ) might not be able to end them promptly due to political pressures. The government’s plan to implement a substantial spending package to aid areas affected by a recent earthquake creates an obstacle to quickly raising funding costs. Ishiba acknowledged that the quake’s impact could delay the BOJ’s plans for a near-term resolution to negative rates, stating that circumstances might differ from BOJ Governor Kazuo Ueda’s initial vision.
Ishiba’s Rising Influence Amidst Political Turmoil
Ishiba, a leading contender to become the next prime minister according to opinion polls, stands out as an influential figure within the LDP. His growing prominence comes as the party faces a political scandal, and some analysts predict that Ishiba, despite his lack of a cabinet position or factional affiliation, could emerge as a frontrunner for the top job. With inflation surpassing the BOJ’s target of 2% and the prospect of sustained wage growth, market participants widely anticipate the end of negative rates by March or April.
Questioning the Sustainability of Ultra-Low Interest Rates
Ishiba has long been critical of Haruhiko Kuroda’s radical monetary stimulus, a central component of former Prime Minister Shinzo Abe’s “Abenomics” policies aimed at reviving economic growth. Ishiba believes that the recent inflationary rise is primarily driven by the weak yen, which increases import costs. He argues that deeper scrutiny is necessary to evaluate the long-term viability of ultra-low interest rates and their potential impact on funding Japan’s significant debt and the broader economy.
Potential Economic Risks from US Presidential Election
Looking ahead, Ishiba expresses concerns about the potential fallout from the US presidential election. He warns that a victory by Donald Trump could lead to increased protectionist policies, impacting Japan’s export-driven economy and increasing risks. As such, Ishiba believes it is crucial to closely monitor the election’s outcome and its potential consequences for Japan.