Japanese Finance Minister Sadakazu Tanigaki again voiced concern yesterday at recent rapid rises in long-term money market rates as investors brace for an end to near-zero official borrowing costs.
The yield on the bellwether 10-year Japanese government bond briefly hit 2.0 percent yesterday for the first time since August 1999.
"I am concerned that the current pace of rising interest rates is too fast," Tanigaki told reporters.
"It is not desirable to see rapid interest rate rises at this point when the Japanese economy is still in mild deflation," he said.
The government is worried that the Bank of Japan may jeopardize the country's economic recovery by tightening monetary policy too early.
"There is a speculation in the market that consecutive rate hikes will come soon. I hope the Bank of Japan will make efforts so that the market understands the central bank's policy correctly," Tanigaki said.
The Bank of Japan last month scrapped its deflation-fighting policy of flooding the financial system with cash and many economists now expect it to end near-zero interest rates as early as this summer.
With Japan's national debt at more than 150 percent of the country's entire annual economic output, rising borrowing costs would increase the burden on already strained public finances.
Meanwhile, Bank of Japan governor Toshihiko Fukui said the central bank will take "appropriate" monetary policy actions to continue aiming for sustained economic growth under price stability.
Fukui told a meeting of the central bank's branch managers that prices in Japan are expected to "stay on a positive trend" with minor fluctuations as a modest improvement in the supply and demand balance continues.
He repeated that the economy is likely to "continue its steady recovery," backed by robust production and consumption.
Japan's core consumer prices rose for a fourth straight month in February as the world's number two economy snaps out of the deflation doldrums.
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