Ex-BoJ’s Governor Kuroda predicts more rate hikes

Former Bank of Japan (BoJ) Governor Haruhiko Kuroda presented a research paper on Wednesday, predicting more interest rate hikes over the coming years.

Key takeaways

Japan's economy is projected to grow by over 1% annually, supported by rising real wages and consumer spending.

The BoJ's gradual approach to rate hikes reflects the positive wage-inflation cycle that keeps inflation stable at the 2% target.

Higher borrowing costs are unlikely to significantly impact businesses or households due to corporate cash reserves and household savings. However, the government could face challenges funding Japan's large public debt, which has grown to ¥1,100 trillion ($6.96 trillion).

A return to bond yields of 2.7% (seen in 2000) could raise annual interest payments to ¥30 trillion, stressing the need for fiscal reform.