Bank of Japan’s Nakamura urges caution in raising interest rates

BANK of Japan board member Toyoaki Nakamura said on Thursday the central bank must move “cautiously” in raising interest rates, as smaller firms have yet to see profitability strengthen enough to weather higher borrowing costs.

“I am personally not confident about the sustainability of wage growth,” Nakamura said in a speech to business leaders in Hiroshima, a city in western Japan.

Nakamura, who is among the most dovish members of the board, also said there was a chance inflation may miss the BOJ’s 2 per cent target from fiscal 2025 onward.

“Consumption lacks momentum as households are becoming more frugal due to rising prices,” Nakamura said, adding that some smaller firms are unable to earn enough profits to keep hiking wages.

“We’re at a critical phase where we need to check many data and cautiously adjust the degree of monetary support in accordance with improvements in the economy,” he said. REUTERS