Japan Interest Rates Could Rise to 0.5％ by March 2025, Says Mizuho Bank CEO

Reuters

17:33 JST, July 2, 2024

TOKYO (Reuters) – The Bank of Japan (BOJ) could hike interest rates twice by the end of March 2025 to reach 0.5%, reflecting the real growth rate of the Japanese economy, the head of Mizuho Financial Group’s 8411.T banking arm said.

But rapid rate hikes won’t be a tool to arrest the weakening yen, which has plunged to a 38-year low against the dollar, Masahiko Kato, chief executive officer of Mizuho Bank, said in an interview with Reuters.

“If (the BOJ) raises rates too strongly, the economic growth that has finally set in will deteriorate,” Kato said. “I don’t have the impression they’ll raise interest rates too hastily.”

The central bank ended negative interest rates after eight years in March, and economists are split over whether another rate increase will come at the next monetary policy later this month.

While inflation translates to higher costs for companies who have to hike wages, this in turn spurs them to adopt new growth strategies such as mergers and acquisitions (M&A), carve-outs, and expansion abroad to boost earnings, Kato said.

Mizuho Bank has identified mid-cap listed companies as a new customer base for its financing and advisory services, as Japan’s acute labor shortage means many such firms lack the specialist knowhow to pursue growth, for instance, through M&A.

The fact that so many companies struggle to raise their corporate value after listing lies behind activist investors’ growing involvement in Japanese firms, as well as the Tokyo Stock Exchange’s campaign to boost corporate value, Kato said.

Mizuho established a seven-person mid-cap growth support team last year, which in April became a standalone department of 70 people.

“Until now it was permissible for companies to have little concept of raising their corporate value,” Kato said.

“But with the Tokyo Stock Exchange’s reforms and now the economy has started moving again, all of a sudden the conditions are in place.”