A member of a key panel advising Prime Minister Sanae Takaichi said the central bank isn’t likely to raise its benchmark rate before March, as authorities will need to confirm that large-scale extra spending is boosting domestic demand.
“The starting point is fiscal policy,” Goushi Kataoka, a member of Takaichi’s economic growth strategy panel, said in an interview Tuesday. He estimated that a supplementary budget of around ¥20 trillion ($129 billion) would be necessary this fiscal year, far bigger than the ¥13.9 trillion package compiled a year ago by Takaichi’s predecessor.
If the economic package — expected to be unveiled later this week — is implemented effectively, domestic demand could expand as early as the first quarter of next year, and “depending on the situation, conditions could be in place for a rate hike as soon as March,” said Kataoka, who was a staunch supporter of fiscal and monetary stimulus during a previous stint as a member of the Bank of Japan’s board.
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