Famous economist professor: Given the risk of a lagging curve, the Bank of Japan should raise interest rates as soon as possible

According to the Zhitong Finance APP, renowned economist Hiroshi Yoshikawa, who previously served as an advisor to the Japanese Prime Minister, stated that the Bank of Japan should raise its benchmark interest rate as soon as possible, as it risks falling behind the curve. Hiroshi Yoshikawa said, "The Bank of Japan would be better off taking action early. In a sense, they may already be behind." It is noteworthy that Hiroshi Yoshikawa, an emeritus professor at the University of Tokyo, has been a close friend of Bank of Japan Governor Kazuo Ueda for nearly sixty years. As Hiroshi Yoshikawa made these remarks, the market is closely watching whether the Bank of Japan will raise interest rates next week or next month. On Monday, the Bank of Japan announced that Deputy Governor Ryozo Himino will deliver an important speech to local business leaders in Yokohama on January 14 next year, followed by a press conference on the same day. Japanese media generally reported that this move is unusual, as members of the Bank of Japan's monetary policy committee have never held such activities before the first monetary policy meeting of the year since former Governor Haruhiko Kuroda took office in 2013. After the Bank of Japan's unusual arrangement, market expectations for an interest rate hike in December have cooled. However, Hiroshi Yoshikawa pointed out several factors supporting the possibility of the Bank of Japan raising rates next week. He stated, "A 0.25% benchmark interest rate in Japan is very low. Unless there is a significant change in the economy, raising rates is quite natural. This is not hawkish; it is reasonable." Hiroshi Yoshikawa noted that Japan's inflation level has been roughly comparable to that of the United States and Europe this year, and considering the reality, Japan's borrowing costs are too low. However, he added that Japan's benchmark interest rate does not need to be as high as those in the United States and Europe. He indicated that Japan's nominal neutral interest rate might be around 1%. Hiroshi Yoshikawa stated that the Bank of Japan may face economic downturns or even an economic crisis during the process of policy normalization. He said, "The possibility that the Bank of Japan will be forced to cut rates in the future cannot be ignored. If the rate is 0.25%, it can only be cut to 0%. Therefore, providing rates when possible is the correct approach." Kazuo Ueda expressed similar views in an interview last month, stating that it is best to lower interest rates in the face of an economic recession, as unconventional policy measures cannot fully replace standard interest rate policies. Traders currently estimate that the likelihood of the Bank of Japan raising rates this month is about 28%, down from 66% at the end of last month. Citigroup on Monday pushed back its forecast for the Bank of Japan's interest rate hike from December to January next year, stating that the Bank of Japan has little reason to rush into action So far, the data shows that the performance of the Japanese economy is in line with the predictions of the Bank of Japan. According to a report released on Monday, Japan's economic growth rate for the third quarter has been revised upward, while the Bank of Japan's key inflation indicator has remained at or above the 2% price target level for more than two and a half years. Hiroshi Yoshikawa stated, "The Bank of Japan is basically saying that inflation is not enough. I don't know if there are others in the Japanese public who think this way." It is worth mentioning that Hiroshi Yoshikawa emphasized that he does not have insider information, and his views are his own. He added, "The Bank of Japan seems to be a bit too cautious. The most important thing about monetary policy is flexibility. If the economic situation changes after raising interest rates, you can directly lower the rates. You shouldn't see this as a failure."