Taro Kono urges the Bank of Japan to raise interest rates to stabilize yen and curb inflation

Taro Kono Candidly Discusses Low Interest Rate Drawbacks

Following Prime Minister Shigeru Ishiba's resignation announcement, uncertainty has gripped Japan's political scene, with the direction of monetary and fiscal policies becoming a focal point of public concern. Recently, LDP lawmaker Taro Kono clearly stated that the Bank of Japan should proactively raise interest rates to address yen depreciation and inflationary pressures. He believes that maintaining extremely low interest rates for an extended period not only fails to resolve economic issues but also exacerbates the burden on people's livelihoods.

Stabilizing the Yen Becomes an Urgent Policy Task

Taro Kono emphasized that the continued weakness of the yen exchange rate has already affected the living costs of ordinary people. As prices of imported goods generally rise, inflationary pressures are gradually becoming apparent. He pointed out that if the central bank continues to maintain the current interest rates, the import-dependent economic structure will face more severe imported inflation, making it difficult for households and businesses to bear.

Criticism of Fiscal Stimulus and Cash Handouts

Discussing fiscal policy, Taro Kono did not shy away from criticizing the idea of "winning support through cash handouts." He argued that such short-term measures not only fail to bring substantial economic improvement but also further increase the fiscal deficit. He believes the root of the problem lies in long-term low-interest rate policies that have weakened economic vitality and therefore, interest rate hikes are necessary to restore market confidence.

Policy Disagreements amid LDP Leadership Election

Following Shigeru Ishiba's resignation, the LDP is set to commence its leadership election. Taro Kono has yet to declare whether he will run, but his firm stance on policy has already attracted public attention. Another leading candidate, Sanae Takaichi, favors continued monetary easing and fiscal expansion, forming a stark contrast between the two. This divergence not only reflects differing opinions within the LDP but will also directly impact the economic path of the next Prime Minister.

The Pressure of Debt Sustainability Grows

As voices advocating fiscal stimulus from figures like Sanae Takaichi grow, concerns over Japan's public debt sustainability have resurfaced in the market. The yields on ultra-long-term government bonds are affected, with investors wary of whether the government will resort to issuing new debt to maintain spending. Taro Kono emphasized that if interest rates are not raised to stabilize exchange rates and price levels, Japan may find itself in a dual predicament of debt and inflation.

External Pressure and Trade Disagreements

On the international relations front, Taro Kono also criticized the outcome of recent U.S.-Japan tariff negotiations. He noted that even with the U.S. reducing tariffs from 25% to 15%, the level remains high and unfavorable for trade balance. This statement indicates he is not only focused on the domestic economy but also seeks to assert an independent voice in international affairs.

Market and Policy Outlook

The market currently generally expects the Bank of Japan to maintain interest rates at the upcoming meeting, but Taro Kono's statements remind people that the political call for interest rate hikes is gaining strength. If the LDP's power dynamics change after the election, the Bank of Japan's policy independence and future direction could be impacted.

Overall, Taro Kono's remarks are not only a critique of the current monetary policy but also a public declaration of the future economic path. In the backdrop of the forthcoming leadership election, this stance could become one of the core issues of debate in the political arena.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.