Former Bank of Japan Governor Haruhiko Kuroda: The interest rate differential between Japan and the U.S. is expected to narrow, and the yen will appreciate to 120-130 yen per dollar
Former Bank of Japan Governor Haruhiko Kuroda stated that the yen could appreciate to 120-130 yen per dollar, as the interest rate differential between Japan and the U.S. is expected to narrow. He pointed out that the current exchange rate is about 153 yen per dollar, which is too weak, and it will recover to 120 or 130 yen in the future. He mentioned that the opposing monetary policies of the Federal Reserve and the Bank of Japan will naturally narrow the interest rate differential, aiding the appreciation of the yen. Kuroda also noted that the 2% inflation target has been achieved, the economic growth rate is about 1.5%, and the unemployment rate is 2.6%, suggesting that it is appropriate to continue raising interest rates
According to the Zhitong Finance APP, former Bank of Japan Governor Haruhiko Kuroda stated that the yen could appreciate to a level of 120-130 yen per dollar, as the interest rate differential between Japan and the United States is expected to narrow. Kuroda said, "The current exchange rate is about 153 yen per dollar, which is too weak. At some point, this rate will return to 120 or 130 yen per dollar." He also mentioned that the opposing monetary policies of the Federal Reserve and the Bank of Japan will naturally narrow the interest rate differential between the two countries, which will help the yen appreciate to levels seen more than two years ago.
Kuroda's remarks were made about half an hour after the Bank of Japan announced it would maintain interest rates. The latest interest rate decision by the Bank of Japan met market expectations, passing with a vote of 7 to 2, with committee members Naoki Tamura and Hajime Takata proposing a 25 basis point rate hike. The market's reaction to this decision was relatively muted, with little change in the yield on Japan's 10-year government bonds and a slight decline in the yen.
Since 2013, Kuroda has implemented the Bank of Japan's ultra-loose monetary policy and has led an unprecedented period of policy. After ten years of large-scale easing, during which the Bank of Japan purchased assets including bonds, stocks, and real estate funds, and kept interest rates in negative territory for many years, the current Bank of Japan Governor Kazuo Ueda is responsible for beginning the normalization of policy.
Before becoming the Governor of the Bank of Japan, Kuroda was once Japan's chief currency official, responsible for the Ministry of Finance's decisions on whether to intervene in the foreign exchange market. He stated, "The 2% inflation target has been achieved, the economic growth rate is about 1.5%, and the unemployment rate is only 2.6%." He hinted that current conditions are suitable for the Bank of Japan to continue raising interest rates. On Thursday, two members still opposed maintaining the interest rate, but according to a survey of economists conducted earlier this month, most expect the Bank of Japan's next rate hike to occur in January next year.
The former governor pointed out that the Bank of Japan's decision to remain unchanged in the past five meetings reflects its desire to observe the impact of U.S. President Trump's tariff policies on the Japanese economy. Kuroda stated that this impact has been less than previously expected. He said, "I am not sure if they will take action today, but in any case, they may take action today or at the next meeting in December." This statement suggests he believes there is a higher likelihood of a rate hike by the end of the year
