honda Etsuro Weighs In on Takaichi‘s Economic Path, Yen Weakness, and Monetary Policy
Following the election of Sanae Takaichi as leader of the Liberal Democratic Party (LDP), economic analyst Honda Etsuro, a former cabinet advisor to Takaichi and contributor to her book “National Power Studies,” has offered insights into the potential direction of Japanese economic policy. According to a recent report from bloomberg,Honda believes a modest increase in interest rates – from the current level of around 0.5% to approximately 0.75% - is manageable, provided the economic situation doesn’t considerably worsen. He indicated a 0.25% increase could be implemented as early as December, tho concerns regarding the US economy remain a factor.
Honda’s assessment suggests that further interest rate hikes are not off the table even under Takaichi, who advocates for aggressive fiscal and monetary policies to stimulate growth. However, he anticipates that the timeline for such increases will likely be more gradual than previously anticipated by the market.
The market reacted sharply to takaichi’s victory on September 4th, initially favoring former contender shinjiro Koizumi. The Nikkei stock Average experienced a significant rise, exceeding 2,000 yen compared to the previous weekend. Simultaneously,the yen plummeted to its lowest value as august 1st,briefly reaching the mid-150 yen range against the dollar.This led to a considerable decrease in predictions for an October interest rate hike, falling from nearly 70% to around 20%.
Honda cautioned that continued yen weakness could complicate the Bank of Japan’s (BOJ) deliberations regarding interest rate adjustments. While a weaker yen typically benefits the Japanese economy, an excessive decline could exacerbate inflationary pressures. He specifically noted that a yen exceeding 150 to the dollar woudl be considered “a bit excessive.” Following Honda’s comments, the yen partially recovered, briefly returning to the 149 yen 80 sen range.
Takaichi has emphasized a focus on combating rising prices, and has indicated openness to utilizing deficit bonds for investments like defense spending, while also expressing a commitment to maintaining consumption tax cuts.Balancing these aggressive fiscal measures with the need to control inflation will be a key challenge.
The future of the 2013 joint statement between the government and the BOJ,aimed at overcoming deflation,is also under scrutiny. This statement is a cornerstone of Abenomics. Takaichi has stated a need to “carefully consider whether the Accord is the best now.” However, Honda advised against hasty changes to the agreement, arguing that alterations could inadvertently impact crucial elements of the statement, particularly given the continued importance of achieving the 2% price stability target.
honda highlighted Takaichi’s potential to foster strong relations with the United States, drawing on her close ties to former Prime Minister Shinzo Abe, who enjoyed a positive relationship with former US President Donald Trump.He believes Takaichi is well-positioned to build a similar rapport with trump, contrasting this with the less close relationship between Abe and former Prime Minister shigeru Ishiba.
Note: This article is based solely on the provided text and does not include any external facts or speculation. All facts and viewpoints are directly attributed to Honda Etsuro and Takaichi Sanae as reported in the source material.
