Former Bank of Japan member says it's unlikely to raise interest rates again this year

According to Cointelegraph, former Bank of Japan board member Makoto Sakurai stated that due to the economic turmoil caused by the sudden interest rate hike last time, the Bank of Japan will not raise interest rates again this year. In a report on August 12th, Makoto Sakurai said: "At least for the rest of this year, they won't be able to raise interest rates again."

In early August, after the Bank of Japan suddenly raised its benchmark interest rate to 0.25%, there was a significant sell-off in stock and cryptocurrency markets. This increase disrupted yen carry trades - investors borrowed yen at low-interest rates and used these funds to purchase foreign assets. Notably, it wasn't the rate hike itself that acted as a catalyst but rather what happened afterward: a surge in yen on foreign exchange markets. From July 31st onwards, USD/JPY fell from around $1 per ¥153 down to ¥145. Overnight, loan costs denominated in yen rose sharply.

Although this rate hike may have disrupted global markets, Sakurai stated that for Japan it was an essential change. For the past 17 years, Japanese interest rates have remained between 0% and -0.1%. Sakurai said: "As part of their return to normal monetary policy they decided it would be good move from almost zero percent towards a normal level of 0.25%." He added that it is wise for central banks to wait and see how further hikes proceed.