The Bank of Japan needs to raise interest rates to prevent excess borrowing that helped trigger the U.S. subprime mortgage crisis and subsequent financial-market turmoil, central bank Policy Board member Atsushi Mizuno said Thursday.
"Overinvestment amid conditions of ample global liquidity was a major factor in causing the subprime issue," Mizuno said in a speech in Kofu, Yamanashi Prefecture. The market turmoil "is proof that keeping rates at levels that stray from fundamentals may actually cause instability."
Since July, Mizuno, 48, has been the lone advocate on the BOJ's Policy Board of raising interest rates. The BOJ's 0.5 percent short-term rate, the lowest in the industrialized world, has encouraged investors to borrow in Japan to seek higher returns abroad in so-called carry trades.