BOJ may raise rates in March if yen resumes slide, says ex-policymaker

By Leika Kihara

TOKYO, Feb 23 (Reuters) - The Bank of Japan whitethorn rise involvement rates arsenic soon arsenic March if the yen renews its descent up of a U.S.-Japan acme expected to beryllium held during the month, erstwhile cardinal ‌bank committee subordinate Makoto Sakurai told Reuters.

Prime Minister Sanae Takaichi is expected to sojourn Washington for a gathering with U.S. ‌President Donald Trump astir the clip the BOJ holds its adjacent argumentation gathering connected March 18-19.

Takaichi whitethorn question the BOJ's assistance successful keeping yen falls successful check, arsenic ​the information Washington conducted complaint checks to prop up the yen past period signals its penchant for the currency to fortify against the dollar, Sakurai said successful an interrogation connected Friday.

"Currency involution has lone a impermanent effect successful combating yen-selling pressure. The champion mode to antagonistic a anemic yen is for the BOJ to rise involvement rates," said Sakurai, who retains adjacent interaction with incumbent policymakers.

A renewed yen descent would propulsion ‌up ostentation done higher import costs and offset ⁠some of the downward unit from authorities substance subsidies, Sakurai said.

If the request to combat crisp yen falls emerges, the BOJ tin warrant raising rates arsenic soon arsenic successful March by pointing to prospects of ⁠strong wage maturation successful yearly outpouring wage talks betwixt companies and unions, helium added.

"It would marque amended consciousness to hold until April but depending connected yen moves, there's a accidental the BOJ could rise rates successful March," Sakurai said.

Sakurai served arsenic BOJ committee subordinate from 2016 to 2021, astir the ​time ​the cardinal slope began shifting its argumentation absorption distant from immense plus purchases ​towards controlling semipermanent involvement rates done the instauration of ‌bond output control.

He said the BOJ whitethorn request to hike doubly each successful 2026 and 2027 to propulsion its argumentation complaint - present astatine 0.75% - to 1.75%, which is apt the level that neither cools nor overheats the economy.

Hiking rates astatine a faster gait could wounded Japan's banking strategy by expanding bankruptcies among tiny firms and hurting the equilibrium expanse of determination lenders, Sakurai said.

The BOJ ended a decade-long, monolithic stimulus programme successful 2024 and raised rates respective times including successful December, erstwhile it took its short-term argumentation complaint to a 30-year ‌high of 0.75%.

With ostentation exceeding the BOJ's 2% people for astir 4 years, ​Governor Kazuo Ueda has signaled the BOJ's readiness to support raising rates if ​its economical projections materialise.

A bulk of economists polled by Reuters ​expect the BOJ to rise rates to 1% by end-June, portion markets person priced successful a astir 70% ‌chance of a hike by April.