BOJ should avoid December rate hike, says Takaichi’s economic adviser

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TOKYO (Reuters) -The Bank of Japan should avoid raising interest rates in December and wait at least until January next year to support a fragile economy, Takuji Aida, an economist chosen to join a key government panel, told the Nikkei newspaper.

The government should cushion the blow to households from rising living costs with big spending until their real income turns positive, Aida, who is chief Japan economist at Credit Agricole, told Nikkei in an interview published on Monday.

“It would be quite risky for the BOJ to raise interest rates in December,” as Japan’s economy likely contracted in the third quarter, said Aida, who has been chosen to join premier Sanae Takaichi’s flagship panel to debate her administration’s growth strategy.

Raising rates in December would also run counter to the government’s efforts to stimulate the economy with large-scale spending, said Aida, who is widely considered as among Takaichi’s closest advisers on economic policy.

It would be more feasible for the BOJ to raise rates in January, if it can foresee the economy achieving solid growth in fiscal 2026, Aida said.

The BOJ exited a decade-long, massive stimulus programme last year and raised interest rates to 0.5% in January. It has kept rates steady since then. Many analysts expect the central bank to hike rates to 0.75% next month or January next year.

As the boost to growth from fiscal spending will materialise in 2027, the BOJ could eventually see scope to raise rates at a pace of once every quarter for its policy rate to reach 2% by 2028, Aida said.

(Reporting by Leika Kihara; Editing by Sam Holmes)