Japan’s Kono Says Central Bank Needs to Raise Rates to Lift Yen

(Bloomberg) — A prominent minister running Japan’s digital agency left the door open for a bid to become prime minister as he called on the central bank to increase interest rates to boost the value of the yen and bring down energy and food costs. 

Speaking on Bloomberg Television on Wednesday, Kono Taro highlighted the problems generated by the yen’s sharp decline against the dollar, including the inflationary effect on domestic prices. Kono said that while a cheaper yen can help boost exports, the benefit to the country was now limited because many Japanese companies have production facilities overseas.

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“The currency is a problem for Japan,” Kono said, adding, “the yen is too cheap and we need to bring it back.” 

Japan’s currency authorities have been fighting yen weakness in recent days, with yen-buying intervention totaling around ¥5.64 trillion ($35.6 billion) over last Thursday and Friday, according to calculations based on central bank data and money broker estimates.

Former US President Donald Trump criticized Japan for benefiting from a weaker yen in a Businessweek interview published Tuesday. Kono said Tokyo was also worried about the excessive weakness of its currency, adding the way the two “are looking at it is probably the same way.” 

Kono’s remarks could add pressure on the Bank of Japan’s policy board to raise interest rates when it meets at the end of this month. 

In the interview, Kono also said Japan was closely monitoring the presidential race in the U.S., adding Tokyo wanted to deepen economic and security ties with Washington. 

Kono, who has long said he aims to eventually become premier, deflected a question about the prospect of launching his own bid to replace Prime Minister Fumio Kishida at an election for the presidency of the ruling Liberal Democratic Party in September. Given the LDP’s dominance in parliament, its leader is virtually assured of becoming prime minister.

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Japanese media reported recently that Kono had told Taro Aso, the deputy prime minister, of his intention to run in the election. Kono has declined to confirm the reports.

Kono ran for the LDP presidency in 2021, finishing a distant second. While he has had strong support among LDP rank-and-file members, Kono has struggled to gain widespread support among LDP lawmakers.

In the interview, Kono said the appeal of becoming prime minister included the ability to push his own policy proposals.

Asked if he aimed to be prime minister, Kono responded: “Hopefully, some time.” 

No LDP parliamentarians have formally declared their intention to contest the LDP leadership election in September. An All Nippon News Network poll conducted over the weekend found the highest level of support was for Shigeru Ishiba at 27%, followed by Shinjiro Koizumi at 18% and then Kono and two other lawmakers on 6%.

Kono asks that his name be written in the Japanese style with family name first.

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