No rate hike in October? After Japan's new Prime Minister urged caution, Shitada Kazuo released a dovish signal
Bank of Japan Governor Kuroda Haruhiko, under the suggestion of the new Prime Minister Ishiba Shigeru, has sent a dovish signal, indicating a cautious approach to raising interest rates. Kuroda pointed out the uncertain global economic outlook and the instability of financial markets, emphasizing the need to monitor the impact of these factors on the Japanese economy. Both the new Prime Minister and the Minister of Economy are against raising rates prematurely, and it is expected that the borrowing costs will remain unchanged at the meeting on October 31st
According to the financial news app Zhitong Finance, after Japan's new Prime Minister Shizo Abe and his close ally urged caution when considering raising interest rates, Bank of Japan Governor Haruhiko Kuroda sent a dovish signal regarding the policy outlook. Kuroda stated at a meeting in Tokyo on Wednesday: "Starting from the U.S. economy, the global economic outlook is uncertain, and financial markets remain unstable. Currently, we will closely monitor the developments with a high sense of urgency."
Kuroda's remarks indicate that the Bank of Japan is aligning its stance with the new government after Shizo Abe and a cabinet minister explicitly opposed any premature rate hikes. While Kuroda's comments are largely consistent with the policy statement from the September meeting, he also added some wording to express a continued cautious approach.
When discussing global economic and financial market trends, Kuroda stated: "We need to carefully study how these developments will affect the outlook for the Japanese economy and prices, the risks faced, and the possibilities for achieving the outlook."
His comments may reinforce the expectations of observers that the Bank of Japan will keep borrowing costs unchanged at the next meeting ending on October 31.
After winning the Liberal Democratic Party leadership election last week, Shizo Abe was elected as Prime Minister by the Japanese parliament on Tuesday. The new Prime Minister indicated that he would not seek a rate hike in the short term and expressed his desire for the Bank of Japan to "maintain the current stance" to help eliminate deflation.
Japan's new Minister of Economy, Trade, and Industry, Akira Amari, further emphasized this view. Amari stated on Wednesday that any views suggesting Shizo Abe supports rate hikes may not be accurate.
Yoshimasa Maruyama, an economist at Mitsubishi UFJ Morgan Stanley Securities, stated on Wednesday: "The remarks from Shizo Abe and Akira Amari clearly oppose early rate hikes. A rate hike at the end of this month is now impossible."
Last year, former Japanese Prime Minister Fumio Kishida personally selected Haruhiko Kuroda as the Governor of the Bank of Japan. Traders are closely watching the collaboration between Kuroda and Shizo Abe as political factors are widely believed to influence the Bank of Japan's policies.
After being appointed as a member of the Japanese cabinet on Tuesday, Akira Amari also urged caution in raising interest rates.
When asked about the possibility of rate hikes, Amari stated, "I hope they make careful judgments and should definitely not take any action to cool the economy for a period of time."