Some in the Liberal Democratic Party say it is too early for the Bank of Japan to raise interest rates again – some say it will be difficult to raise rates before the end of the year – Bloomberg

As the yen continues to depreciate rapidly, some within the Liberal Democratic Party say that expectations for further interest rate hikes by the Bank of Japan are premature. Ahead of political events such as the presidential election, the dissolution of the House of Representatives and the general election that will be discussed later this year, there is a desire to eliminate as much as possible material that could cause anxiety in the lives of the people.

House of Councilors member Masashi Nishida dismissed the possibility of further interest rate hikes in July or September as “impossible.” He also pointed out that small and medium-sized businesses are under pressure to raise wages to compensate for labor shortages and cannot afford to take on increased borrowing costs due to interest rate hikes. He said that under the Fumio Kishida administration, the government should focus on increasing real demand in the economy, and expressed displeasure at expectations for an early interest rate hike. Mr. Nishida serves as the head of the party’s fiscal policy review headquarters.

When asked about the pros and cons of raising interest rates, 10 members of the same party expressed concern that it is too early to do so, as it would have a direct impact on people’s lives through things like raising mortgage interest rates. Six of them pointed out that there was strong opposition to the issue of political funds in their constituencies, and that if interest rates rose before the dissolution and general election, the Liberal Democratic Party could suffer a historic defeat. The four members expressed the view that the opposition within the party to raising interest rates will remain strong until around the time of the party presidential election in September.

Prime Minister Fumio Kishida’s cabinet approval rating increased slightly in some public opinion polls last weekend, but it has not moved out of the “dangerous zone” of less than 30%. It is reported that the Liberal Democratic Party is having a tough time in the Shimane 1st Ward, the only district in which it fielded a candidate in the third House of Representatives by-election, which will be counted on the 28th.

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Prime Minister Kishida has not specified when the House of Representatives will be dissolved. The term of office for members of the House of Representatives expires in October next year, but it has been pointed out that there is a possibility of dissolution and a general election during the current Diet session, which runs until June this year, or immediately after the presidential election in September. While the market is focused on the depreciation of the yen due to the difference in interest rates between Japan and the U.S., the Liberal Democratic Party is concerned about the negative effects of raising interest rates on people’s lives, such as rising mortgage interest rates and deteriorating business conditions for small and medium-sized enterprises, ahead of the election. ing.

Eiji Michie, chief bond strategist at SBI Securities, believes it will be difficult to raise interest rates at the September and October decision-making meetings, given the possibility of an Liberal Democratic Party presidential election and subsequent general election. In particular, in October, ahead of the U.S. presidential election, markets became unstable with anticipation of former President Trump’s victory, and the Bank of Japan pointed out that the “political risks are significant for the Bank of Japan.” If the central bank is unable to raise interest rates in July, it will be difficult to raise them this year.

In a Bloomberg survey of economists from December 12 to 17, 41% expected another rate hike in October, 19% in July, and 17% in September. Eighty percent of economists expect the government to take further interest rate hikes by the end of this year.

80% expect the Bank of Japan to raise interest rates within the year, with 40% expecting the highest rate in October – Survey