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BOJ should wait at least six months to raise rates, opposition director says
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BOJ should wait at least six months to raise rates, opposition director says

TOKYO: The Bank of Japan should wait at least six months before raising interest rates until there are signs of sustainable wage gains above inflation, the head of the opposition party the ruling LDP is seeking support from has said.

“There should be no significant changes in monetary policy as we need to observe the wage growth trends from next year’s spring negotiations,” Yuichiro Tamaki, head of the opposition Democratic People’s Party (DPP), said in an interview with Reuters.

Following Japan’s October 27 general election, Tamaki’s party has gained influence over government policy as the ruling Liberal Democratic Party seeks support to maintain power.

The PDL and its coalition partner Komeito are 18 seats short of a majority in the 465-member lower house, while the DPP, which advocates higher wages and cuts to both sales and income taxes, saw the number of seats increase from seven to 28.

The Bank of Japan ended negative interest rates in March and raised short-term interest rates to 0.25 percent in July, saying Japan was making progress toward sustainably reaching its 2 percent inflation target.

It kept short-term interest rates at 0.25 percent at Thursday’s policy meeting, but said risks around the U.S. economy had eased somewhat, signaling conditions were in place to raise interest rates again.

However, Tamaki said it was necessary to eventually normalize monetary policy and allow the market to function properly.

Tamaki said maintaining easy monetary policy may push the yen lower. “But it is the strength of the US economy that maintains the gap between US and Japanese interest rates, and monetary policy should not be used to manipulate exchange rates,” he said.

He declined to comment on the currency’s current levels, but said currency interventions only have a short-term impact, although they could act as a deterrent to speculative moves.