Former Bank of Japan Governor Kuroda expects further interest rate hikes.

Former Governor of the Bank of Japan Haruhiko Kuroda presented a research paper on Wednesday morning, in which he indicated that he expects the Bank of Japan to raise interest rates further from current levels in the coming years.

The key points outlined in the paper presented by Kuroda are as follows:

• Japan's economy is expected to grow by more than 1% annually, supported by rising real wages and an increase in domestic consumption.
• The gradual approach to monetary policy and interest rate hikes by the Bank of Japan reflects a positive wage and inflation cycle that maintains inflation stability at the 2% target.
• Higher borrowing costs adopted by the Bank of Japan are unlikely to significantly impact companies or households, due to companies' cash reserves and household savings.
• However, the Japanese government may face some challenges in financing Japan's large public debt, which has grown to 1,100 trillion yen (or approximately $6.96 trillion), as higher interest rates will further increase it.
• The return of Japanese government bond yields to 2.7% (which was last seen in 2000) could raise Japan's annual interest payments to 30 trillion yen, highlighting the need for fiscal reform.