Former Bank of Japan Governor Haruhiko Kuroda: The interest rate differential between Japan and the United States is expected to narrow, and the yen is expected to appreciate to 120-130 yen to the US dollar.

Former Bank of Japan Governor Haruhiko Kuroda said that the yen could appreciate to a level of 120-130 yen against the US dollar, as the interest rate differential between Japan and the United States is expected to narrow. Kuroda said, "The current exchange rate is about 153 yen against the US dollar, which is too weak. At some point, the exchange rate will return to 120 or 130 yen against the US dollar." He also mentioned that the opposite direction of monetary policies taken by the Federal Reserve and the Bank of Japan will naturally narrow the interest rate differential between the two countries, which will help the yen appreciate to levels seen over two years ago. Kuroda made these remarks just half an hour before the Bank of Japan announced that it would maintain its interest rates unchanged. The latest rate decision by the Bank of Japan was in line with market expectations, with the decision passing with a 7-2 vote, with committee members Naoki Tamura and Hajime Takata proposing a 25 basis points rate hike. The market's response to this decision was relatively muted, with little change in Japan's 10-year government bond yields and a slight decline in the yen. Since 2013, Kuroda has implemented the Bank of Japan's ultra-loose monetary policy and led an unprecedented policy era. Following a decade of large-scale easing policies, which included purchasing assets such as bonds, stocks, and real estate funds, and maintaining interest rates in negative territory for many years, the current Bank of Japan Governor Haruhiko Kuroda has taken charge of normalizing policies. Prior to becoming the Governor of the Bank of Japan, Kuroda was once Japan's chief currency official, responsible for deciding whether to intervene in the foreign exchange market. He stated, "The 2% inflation target has been achieved, economic growth is around 1.5%, and the unemployment rate is only 2.6%." He implied that current conditions are conducive for the Bank of Japan to continue raising interest rates. On Thursday, there were still two members who opposed keeping rates unchanged, but according to a survey of economists earlier this month, most expect the next rate hike by the Bank of Japan to take place in January next year. The former Governor noted that the Bank of Japan's decision to stand pat in the past five meetings reflected its desire to observe the impact of US President Trump's tariff policies on the Japanese economy, which he said has been lower than previously expected. He said, "I'm not sure if they will take action today, but either way, they may take action today or at the next meeting in December." This statement suggests he believes there is a higher possibility of a rate hike at the end of the year.