Asahi Noguchi Urges Bank of Japan to End Reflationary Policies

Former Bank of Japan board member and academic Asahi Noguchi stated that Japan no longer requires expansionary fiscal and monetary policies to boost demand. Noguchi argues that because underlying inflation is near the 2% target and wages are stabilizing, continuing reflationary policies is too risky.

Noguchi projects the Bank of Japan will likely raise its policy rate from 1.25% to 1.5% in December. He notes that the central bank must accelerate these hikes to prevent the yen from sliding below 160 against the dollar, a move that would trigger a new wave of food inflation. While he believes a hike to 1.75% is manageable, he warns that a move to 2% could shock households and firms.

Additionally, Noguchi cautioned against the large spending plans of Premier Sanae Takaichi. He asserts that excessive fiscal expansion could increase bond yields and crowd out private investment.