The Bank of Japan likely won’t change policy abruptly enough to derail budget discussions, according to a senior member of an opposition party whose support is needed by Prime Minister Shigeru Ishiba’s minority government.
While the BOJ shouldn’t rush any interest rate hikes when the economy is at a renewed risk of falling back into deflation, the central bank is unlikely to do something that interferes with the formulation of the budget, Democratic Party for the People tax chief Motohisa Furukawa said in an interview on Wednesday.
Asked if a possible December rate hike would make the DPP less cooperative on budgetary matters, Furukawa played down the likelihood of the BOJ moving so quickly that it would have a detrimental impact on public borrowing costs. It’s "unthinkable” that rate hikes will be rapid, given that the central bank carefully mulls the effect of its policies on Japan’s finances and that the government leaves an ample buffer in calculating interest payments on its debt, Furukawa said.
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