TOKYO (Reuters) – Tsutomu Watanabe, professor of economics at the University of Tokyo, said in an interview with Reuters that the BOJ could raise short-term policy interest rates as early as next year depending on the outcome of next year’s spring labor offensive. Stated. Watanabe, who serves as a member of the special session of the government’s Council on Economic and Fiscal Policy, said, “If it becomes clear that the views of labor and management have changed, it is possible to raise interest rates.”
On the other hand, Professor Watanabe pointed out that both companies and labor unions are “half-skeptical” about the sustainability of wage increases, which have gained momentum this year. Wage hikes for small and medium-sized enterprises this year were better than expected, but because they were realized in a tough situation due to high raw material prices, wage hikes for next year “are said to be even tougher,” he said. In order to increase the predictability of companies and labor unions, it is necessary for the government to take measures such as indicating future minimum wages.
Professor Watanabe praised the inclusion of the wording of wage increases in the statement of the Bank of Japan decision-making meeting in April as “extremely epoch-making.” He said that if the BOJ added points to be emphasized, such as which of the various wage indicators should be emphasized and the extent to which regular and non-regular workers should be considered, “predictability will be further increased.”
Bank of Japan Governor Kazuo Ueda said that the yield curve control (YCC) that he inherited from his predecessor, Haruhiko Kuroda, should be abolished before raising short-term interest rates. “The biggest lesson is that it’s impossible to hold down two points,” the negative short-term interest rate and the 10-year interest rate, and suggested that the central bank should return to the method of controlling only the uncollateralized overnight call rate.
On the other hand, he said, “If you change the YCC, it will give rise to the nuance of raising the overnight interest rate,” and said that the timing of the revision would be a difficult decision.
Watanabe, who is known as a price researcher and served as a panelist at the Bank of Japan’s study session on prices last year, said, “Wages and prices are starting to move due to circumstances in Japan.” On the outlook for domestic prices, he said there would be “no slowdown” expected by the Bank of Japan. He explained that even if Japanese corporate earnings deteriorated due to the slowdown in the US economy, “wages and prices are determined by (domestic) dynamics that are different from that.”
Professor Watanabe pointed out that the socially accepted idea that prices will not rise, which has been firmly established in Japan for a long time, is crumbling in a positive direction. While businesses are becoming more confident about raising prices and some are learning about the latest pricing strategies, inflation expectations among Japanese consumers, who until now have strongly believed prices will remain unchanged, are rising, he said.
The Bank of Japan, led by Governor Ueda, believes that the main reason for the recent rise in prices is not the strength of demand, but “cost-push factors originating from overseas” (Mr. Ueda’s speech on the 19th). As for the outlook for the consumer price index, excluding fresh food, the impact of price hikes accompanying the rise in import prices will wane, and the rate of increase will slow down to below 2% toward the middle of this fiscal year.
The interview was conducted on the 30th.
(Takahiko Wada, Reika Kihara Editing: Nobuhiro Kubo)
