Former Bank of Japan officials rule out the possibility of another rate hike this year, uncertainty remains until March next year

According to the financial news app Zhitong Finance, Makoto Sakurai, a former board member of the Bank of Japan, said in an interview last Friday that due to the market turmoil caused by the recent rate hike by the central bank and the low likelihood of rapid economic recovery in Japan, the Bank of Japan will not be able to raise policy rates again this year. "At least for the remainder of this year, they will not raise rates again. It is still difficult to say whether there will be a rate hike before March next year."

The recent market turmoil and the Bank of Japan's response have made market participants cautious about the outlook. Overnight index futures markets show that the likelihood of a rate hike before the end of the year is much lower compared to after the Bank of Japan's rate hike in July. Sakurai also remains cautious about this.

Sakurai said, "In the process of normalizing monetary policy, they have decided to transition from a world of almost zero interest rates to a normal 0.25%, which is a good thing." However, he added that this move requires too much effort, so for further rate hikes, "they should wait a while longer."

On July 31, the Bank of Japan decided to raise the policy rate from 0 - 0.1% to 0.25%, causing market turmoil. Against this backdrop, the Bank's communication has been closely watched.

Previously, the strong tone of Bank of Japan Governor Haruhiko Kuroda regarding further rate hikes and concerns about the U.S. economy were seen as contributing to the sharp rise of the yen. The Japanese stock market also experienced its most severe crash since 1987, prompting Deputy Governor Masayoshi Amamiya to promise not to raise rates during market instability to reassure investors.

Sakurai had previously stated in an interview in April that the next rate hike was expected to take place in the autumn, and the process of policy normalization would begin next year. He recently stated, "Amamiya's remarks are appropriate because market stability is now very important."

At the same time, Sakurai criticized Kuroda's communication style at a press conference on July 31. Sakurai said, "It is important to bring the issue to your own territory so that you can present the views you want to present, but Kuroda did not control the situation well." "The Bank of Japan is transitioning from excessive monetary easing to appropriate monetary easing, and the biggest problem is that Kuroda has not been able to firmly convey the maintenance of an easing policy, which has always been their condition."

Sakurai said that without such an explanation, the impression Kuroda ultimately gives is that he will "increasingly raise interest rates."

Sakurai said, "Academic economists are often too straightforward because the answers can be found in the numbers." "But the actual economy is not that simple. Therefore, authorities also need to feel their way and navigate reality."

The Bank of Japan's decision has drawn criticism from Japan's main opposition party. As the Japanese stock market reopens on Tuesday after a public holiday on Monday, a parliamentary committee will meet to decide when to summon Kuroda and Finance Minister Shunichi Suzuki for questioning.

This week coincides with Japan's Obon Festival, a day for Japanese people to commemorate their ancestors. While Bank of Japan officials will not make public speeches, the Japanese government is set to release second-quarter Gross Domestic Product (GDP) data on Thursday, with analysts expecting a rebound in the Japanese economy after a contraction Before making a decision in July, the Bank of Japan faced unusual political pressure. Two senior members of the ruling party expressed their views on the Bank of Japan's policies and the weakening of the yen, seemingly urging the central bank to raise interest rates to support the yen.

Sakurai, when talking about lawmakers and business people publicly calling for a rate hike, said: "Now you know, when you cross the line, the market reacts like this."