Japan's Kato says it's natural that monetary policy will return to positive interest rates


Kato has been described as a “ruling party stalwart”. He is a former Chief Cabinet Secretary and is seen by some analysts as a candidate to become a future Prime Minister.

Kato spoke to Reuters:

  • Japan sees worsening conditions for central bank to normalize monetary policy
  • The Bank of Japan should keep a close eye on economic conditions and carefully coordinate with the government in deciding when to raise rates
  • “Japan is shifting into an era where prices and wages are rising, from where both have barely progressed,”

  • “It is therefore natural for monetary policy to return to the original style in which interest rates move in positive territory, reflecting the functioning of the market.”
  • “The key to the decision on whether to actually raise interest rates is Japan's economy, especially consumption, which is not necessarily strong.”
  • Kato said he was more concerned about the impact of the weaker yen on inflation than the level of inflation. “Over the past two years, the public has clearly suffered from rising inflation”

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In other news from Japan, the Bank of Japan reduced the amount of JGBs purchased over a 5-10 year period in its latest operation to 425 billion yen from 475 billion yen in the previous operation.

USD/JPY has declined, giving longs a chance to reestablish.

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