Despite the Bank of Japan's (BOJ) decision to raise interest rates for the first time in 17 years, the yen remains weak due to Japan's low rates compared to other countries. The BOJ's accommodative monetary policy suggests that the situation is unlikely to change until the U.S. begins cutting rates.
The BOJ's decision-making process reveals a cautious approach. One board member emphasized the need to maintain a cautious stance, as the economy does not warrant rapid interest rate hikes. Former BOJ chief Masaaki Shirakawa argues that calling the decision "historic" is an exaggeration, highlighting the bank's continued commitment to ultraloose monetary policy.
The BOJ's policy decision has implications for Japan's economy. The nation faces challenges in breaking out of its "lost decades" and achieving strong growth. Prime Minister Fumio Kishida's low approval ratings and the ruling party's political funds scandal further complicate the situation.
Kishida emphasizes the importance of breaking away from deflation and achieving a virtuous circle between wages and prices. However, the unpopularity of his party, particularly in urban areas, casts doubt on his ability to turn the situation around.
Japan's economic fortunes are also tied to renewable energy expansion and maritime issues. Offshore wind projects face challenges due to Japan's long coastline and the need for approval from fishing cooperatives. The Thai government's land bridge project has potential economic benefits, but maritime issues must be addressed.
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