The Bank of Japan should avoid raising rates to combat a weak yen because higher borrowing costs would impact consumer and service sector inflation, says Tsutomu Watanabe, a former central bank official and an expert on the subject of price developments.
The BOJ in March ended eight years of negative interest rates and other remnants of its radical stimulus measures, saying it expected rising wages to support consumption and keep inflation sustainably around the 2% target.
BOJ policymakers have signaled the likelihood of further rate hikes on the view that rising wages and consumption will accelerate services inflation, which is crucial for Japan to achieve sustainable price increases.
