Japan economy in ‘delicate state’, says banking lobby head

By Anton Bridge

TOKYO (Reuters) – The chair of the Japanese banking lobby echoed Bank of Japan Governor Kazuo Ueda’s cautious view on the Japanese economy on Thursday and said the central bank needed to see sustained wage increases before raising interest rates.

“The economy at present is in a delicate state, vacillating between positive and negative real wages,” Akihiro Fukutome, chair of the Japan Bankers’ Association, said at a news conference in Tokyo.

The economy’s direction will become clearer once the outcome of next year’s spring wage negotiations and the impact of incoming U.S. president Donald Trump’s plans for the economy are understood, Fukutome said.

Earlier on Thursday the Bank of Japan kept interest rates unchanged as expected, amid uncertainty over the Trump administration’s policies.

While Japan’s banking sector has been boosted by rate hikes this year after seven years of negative rates that kept lending margins razor thin, a flurry of corporate action and a shift from savings to investment among retail customers is supporting healthy profits across the industry, Fukutome said.

Negative interest rates were one contributor to the end of deflation in Japan, he added.