In particular, he cautions that Prime Minister Sanae Takaichi’s large spending plan could become inflationary.

Former BOJ Governor Kuroda argues Japan should continue gradual rate hikes toward a neutral policy stance and tighten fiscal policy due to a resilient economy with inflation and wage gains, signaling about two rate increases per year if momentum persists.

He notes the yen is relatively weak and may be somewhat underpriced, with currency interventions offering only temporary relief and unlikely to have lasting effects.

The stance is presented within a broader debate over Japan’s macro policy direction as inflation and growth solidify the case for normalization.

He warns that large expansionary fiscal measures or tax cuts could backfire by fueling inflation and raising bond yields, and flags inflationary risk in proposals like suspending the sales tax on food.

Inflation and a weaker yen are framing a shift away from Abenomics, toward neutral rates and restrained fiscal outlays.

The analysis highlights a policy divergence between Kuroda’s cautious tightening view and the government’s more expansionary stance, with potential implications for inflation and markets.

Kuroda praises BOJ Governor Kazuo Ueda’s measured messaging and argues against ‘shock therapy,’ favoring a low-profile, gradual normalization of policy.

Now a senior fellow at a policy institute, Kuroda emphasizes fiscal prudence and long-term investment in innovation over expansive spending.

The remarks reflect a move from deflation-fighting stimulus to normalization, with solid growth and inflation running above target.

Discussion includes a potential policy-rate rise from 0.75% toward about 1.5–1.75% if momentum persists, alongside the view that currency interventions have limited lasting impact.

Overall, the BOJ could lift rates toward the 1.5–1.75% range if momentum continues, while maintaining a gradual, data-driven approach.