A senior executive at Mizuho Financial Group stated on Thursday that the Bank of Japan (BOJ) could raise its key interest rate as early as March, with the potential for up to three hikes this year. Satoshi Yamauchi, head of markets at Mizuho Trust & Banking, cited persistent inflation and the weakness of the yen as primary factors for his forecast in an interview with the Reuters news agency.
Yamauchi’s projection suggests a potential end to the BOJ’s negative interest rate policy, which has been in place since 2016. He indicated that an initial rate hike could occur at the central bank’s policy meeting in March or April.
“The BOJ could scrap negative interest rates in March,” Yamauchi said, according to the report. He added that subsequent rate increases could follow in the second half of the year, depending on economic conditions.
The forecast is partly based on the outcome of Japan’s annual spring wage negotiations, known as “shunto.” Yamauchi noted that if major companies agree to significant wage increases, it would support the BOJ’s objective of achieving stable, demand-driven inflation. The central bank has long stated that sustainable wage growth is a prerequisite for normalizing its monetary policy.
The Bank of Japan currently maintains a short-term policy rate of -0.1% and a yield curve control (YCC) program, which sets a cap on 10-year government bond yields. This ultra-loose monetary stance was designed to combat deflation and stimulate the economy.
Recent data shows that Japan’s core consumer price index, which excludes volatile fresh food items, has remained above the BOJ’s 2% target for more than a year. Simultaneously, the Japanese yen has continued to trade at levels near multi-decade lows against the U.S. dollar, which increases the cost of imports for the resource-scarce nation.
BOJ Governor Kazuo Ueda and other board members have maintained that they will continue with monetary easing until their 2% inflation target is achieved in a stable and sustainable manner, accompanied by wage growth. Official statements from the bank have not committed to a specific timeline for any policy changes. Yamauchi’s statements represent one perspective among financial market analysts who are closely monitoring the central bank’s future policy direction.
