Asahi Noguchi, a former Bank of Japan policy board member and currently a specially appointed professor in the Faculty of Economics at Senshu University, said in an interview with Reuters that reflationary policy has run its course. He expressed caution that with the output gap staying positive and the underlying inflation rate approaching 2%, further demand expansion from here carries too much risk. He said wage growth settling at around 3% means underlying inflation is steadily approaching 2%, and that there is now almost no need to support demand. With inflationary pressure mounting globally, he said the BOJ could raise its policy rate to 1.75% going forward, and to around 2% depending on circumstances. On the BOJ's September rate hike, he said that with the market fully pricing it in, there was likely a sense of risk that skipping it would strengthen the yen's weakness and push the dollar-yen rate back above 160 yen.
Former BOJ board member Noguchi says reflation policy is over and expects rate hikes to 1.75%, signaling a stronger yen.
