The Bank of Japan was "insane" to raise its key interest rate to 0.5 percent last week because the economy is still fragile, Bill Emmott, author of several books on the Japanese economy, said Wednesday.

Speaking at a forum organized by Hong Kong-based brokerage CLSA, Emmott said that although the world's No. 2 economy is recovering, weak consumption and wage growth show that it has yet to recover in full scale.

"This means, in my mind at least, the Bank of Japan is insane to be wanting to raise interest rates," said Emmott, a former editor in chief of The Economist whose 2006 book "Hiwa Mata Noboru" ("The Sun Also Rises"), based on a 2005 Economist article, discusses the prospects for Japan's economic revival.

The BOJ Policy Board doubled its benchmark short-term interest rate to 0.5 last month, saying the economy is expanding moderately and uncertainty over the U.S. economy has faded.

"The continued deflation in the market, weakness of wages and continued excess labor supply suggests Japan is well below what we may call a productivity frontier," Emmott said. "Japan's economy is normalizing but it's not yet entirely normal."

Emmott said the economy is expected to grow around 2.0 to 2.5 percent between this year through 2012 due to vigorous business by corporations and increased trade in Asia.

Emmott, who is now director of Development Consultants International, also said Japanese companies became increasingly cost-effective after they began hiring more part-timers and temporary contract workers.

"The growth of part-timers was a way of shaking out the excess labor supply that built up during the 1990s," he said.