New Japanese Prime Minister Shigeru Ishiba’s unexpected warning against raising interest rates is pushing back expectations of another central bank move this year and raising doubts about his communications.
Ishiba triggered a sharp yen slide on Wednesday after he said Japan was not ready for higher borrowing costs for the time being, in an unusually direct remark for a prime minister following his meeting with Bank of Japan (BOJ) Governor Kazuo Ueda.
“This is a surprise,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute in Tokyo.
Photo: EPA-EFE
“This has strengthened my view that there will be no rate hike in December,” Ueno said.
The BOJ holds its next policy meeting later this month and was already widely expected to hold rates steady given its recent cautious signals and the timing of a general election called by Ishiba.
The comments from the new prime minister, a self-declared “defense nerd,” likely reflect his inexperience in communicating with markets. A sharp fall in Tokyo stocks at the start of this week following his victory in the ruling party leadership vote might have contributed to a desire to reassure investors.
“Ishiba may be trying to brush off an image of supporting rate hikes as some in the market view him that way,” Mizuho Securities Co senior market economist Yusuke Matsuo wrote in a note yesterday.
Japanese Chief Cabinet Secretary Yoshimasa Hayashi told reporters yesterday morning that Ishiba believes the specifics of monetary policy should be left to the BOJ, and that the government is monitoring markets with a sense of urgency.
Japan’s currency briefly reached ￥147.24 against the US dollar yesterday morning as investors factored in Ishiba’s comments and stronger-than-expected US jobs data. That is already weaker than the level immediately before Ishiba’s unexpected victory over central bank easing advocate Sanae Takaichi in the ruling party’s leadership election on Friday last week.
The leadership change has fueled volatility in the market, as investors remain skittish over the policy direction of the new leader.
“In a way, Ishiba is trying to show he is market friendly as he probably wants to do everything he can to raise the likelihood of a clear victory in the election,” Ueno said.
“But it doesn’t mean Ishiba will always be putting pressure on the BOJ. I still expect the next hike to come in January,” Ueno added.
Meanwhile, a leading dove on the BOJ’s policy board stressed the need to keep financial conditions easy until inflationary expectations take root, reinforcing the bank’s stance that it would not move too soon.
“It will still take time to establish a public mindset that’s aligned with the 2 percent inflation target,” Asahi Noguchi said yesterday in a speech in Nagasaki.
“Until then, it’s important, more than anything, to maintain accommodative financial conditions patiently,” Noguchi added.
Noguchi, one of two dissenters from the July 31 decision to hike rates, spoke after Ishiba said he sees no need for a rate hike for now. Noguchi’s remarks confirm market views that some dovish opinions remain on the nine-member board, even as authorities have sought to normalize policy by rolling back ultra-loose settings.
Semiconductor business between Taiwan and the US is a “win-win” model for both sides given the high level of complementarity, the government said yesterday responding to tariff threats from US President Donald Trump. Home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Taiwan is a key link in the global technology supply chain for companies such as Apple Inc and Nvidia Corp. Trump said on Monday he plans to impose tariffs on imported chips, pharmaceuticals and steel in an effort to get the producers to make them in the US. “Taiwan and the US semiconductor and other technology industries
SMALL AND EFFICIENT: The Chinese AI app’s initial success has spurred worries in the US that its tech giants’ massive AI spending needs re-evaluation, a market strategist said Chinese artificial intelligence (AI) start-up DeepSeek’s (深度求索) eponymous AI assistant rocketed to the top of Apple Inc’s iPhone download charts, stirring doubts in Silicon Valley about the strength of the US’ technological dominance. The app’s underlying AI model is widely seen as competitive with OpenAI and Meta Platforms Inc’s latest. Its claim that it cost much less to train and develop triggered share moves across Asia’s supply chain. Chinese tech firms linked to DeepSeek, such as Iflytek Co (科大訊飛), surged yesterday, while chipmaking tool makers like Advantest Corp slumped on the potential threat to demand for Nvidia Corp’s AI accelerators. US stock
The US Federal Reserve is expected to announce a pause in rate cuts on Wednesday, as policymakers look to continue tackling inflation under close and vocal scrutiny from US President Donald Trump. The Fed cut its key lending rate by a full percentage point in the final four months of last year and indicated it would move more cautiously going forward amid an uptick in inflation away from its long-term target of 2 percent. “I think they will do nothing, and I think they should do nothing,” Federal Reserve Bank of St Louis former president Jim Bullard said. “I think the
Cryptocurrencies gave a lukewarm reception to US President Donald Trump’s first policy moves on digital assets, notching small gains after he commissioned a report on regulation and a crypto reserve. Bitcoin has been broadly steady since Trump took office on Monday and was trading at about US$105,000 yesterday as some of the euphoria around a hoped-for revolution in cryptocurrency regulation ebbed. Smaller cryptocurrency ether has likewise had a fairly steady week, although was up 5 percent in the Asia day to US$3,420. Bitcoin had been one of the most spectacular “Trump trades” in financial markets, gaining 50 percent to break above US$100,000 and
RSS