Former BOJ Member: The Window for BOJ Rate Hike is Narrowing

Sayuri Shirai, a former member of the Bank of Japan's committee, stated that if the bank wishes to raise interest rates further, it may need to act within this year, or the window of opportunity will close. Japan's weak domestic demand provides insufficient justification for a rate hike, and if the inflation rate falls below the bank's 2% target, it will be even more challenging to proceed with a rate increase. She said, "The Bank of Japan may want to normalize policy as much as possible in a timely manner, even if it can only slightly correct the excessive depreciation of the yen. However, Japan's economy is too weak, and fragile domestic demand is incompatible with a rate hike path." Although Japan's wage growth shows positive signs, persistent inflation suppresses household spending. The latest government data shows that private consumption was flat from January to March. The central bank expects that in the next fiscal year starting April 2026 and subsequent years, consumer inflation will slow to below 2%, which Shirai believes will complicate further rate hike decisions. Growth headwinds are also intensifying, with Japan facing the risk of a technical recession after economic contraction in the first quarter, and exports to the U.S. in April fell for the first time in four months, highlighting the impact of high tariffs. (Jin10)