Japan must pursue higher interest rates and tighten its fiscal policy as the economy shows robust growth and steady wage increases, according to former central bank chief Haruhiko Kuroda. He cautioned that current Premier Sanae Takaichi’s spending plans might exacerbate inflation.
Kuroda suggests that with the economy’s positive trajectory, the Bank of Japan could feasibly raise interest rates biannually in 2026 and 2027. His comments emphasize the departure in policy from his own legacy of driving ‘Abenomics’ and signal an urgent call for fiscal prudence.
Furthermore, while Japan’s fiscal policy remains expansionary under Takaichi’s leadership, Kuroda, now a senior fellow at a policy institute, warns this approach risks further inflationary pressure and could negatively impact bond yields, urging government spending to focus on long-term innovation instead.