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The Bank Of Japan (BOJ) Is Likely To Keep Raising Interest Rates In The Coming Years As Inflation Steadily Moves Toward Its 2% Target, According To Former Governor Haruhiko Kuroda. Known For Launching A Decade-long Stimulus Programme, Kuroda Remains Confident About Japan's Economic Trajectory.

BOJ Rate Hikes Driven By Positive Wage-Inflation Cycle

Kuroda Emphasized That The BOJ Rate Hikes Strategy Has Not Changed. He Pointed Out That The Positive Wage-inflation Cycle Continues, Which Should Help Keep Inflation On Track To Meet The 2% Target. This Cycle Allows The BOJ To Gradually Raise Interest Rates Without Harming The Economy. However, The Bank Of Japan Still Faces Difficulty Determining The Exact Rate Hike Amount, Given The Complexities Of Balancing The Economy.

Economic Impact On Borrowing Costs

Although Higher Borrowing Costs Might Not Impact Businesses Significantly, As They Have Ample Cash Reserves, Japanese Households Could Benefit From Rising Interest Rates. With Real Wages Increasing, Domestic Consumption Is Likely To Stay Strong. Nevertheless, Kuroda Warned That The Public Debt Could Present Significant Challenges. Japan’s Debt Has Ballooned To 1,100 Trillion Yen ($6.96 Trillion), And Any Rise In Borrowing Costs May Increase The Country’s Fiscal Strain.

Japan’s Public Debt And BOJ Rate Hikes Impact

Kuroda Also Addressed The Mounting Concerns Over Japan's Public Debt. If Bond Yields Rise To An Average Of 2.7%, The Government Could Face Annual Interest Payments Of Up To 30 Trillion Yen. As A Result, Kuroda Stressed The Importance Of Strengthening Fiscal Policy To Manage This Debt More Effectively. The Government’s Next Budget Allocates 10 Trillion Yen For Interest Payments, Highlighting The Urgency Of Tackling Fiscal Challenges.

Kuroda’s Legacy And BOJ Rate Hikes Shift Under Ueda

Under Kuroda's Leadership, The Bank Of Japan Implemented Bold Stimulus Measures, Such As Asset-buying Schemes In 2013. Critics Have Argued That These Policies Led To Market Distortions And Harmed Commercial Banks' Profits Due To Prolonged Low-interest Rates. However, Kuroda Defended The Policies, Stating That Any Damage To Regional Banks’ Profits Was Minimal, And The Deterioration Of Bond Market Function Was An Unavoidable Cost For Stimulating Economic Growth.

Now Under The Leadership Of Kazuo Ueda, The Bank Of Japan Has Shifted Its Approach. The BOJ Ended Kuroda's Stimulus Measures And Raised Short-term Rates To 0.25% In July. Ueda Has Signaled That If Japan Continues To Make Progress Toward The 2% Inflation Target, The BOJ Is Prepared To Raise Rates Further.

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