Small but rising opposition party warns BOJ raising rates too rapidly

TOKYO, Jan 22 (Reuters) – The Bank of Japan may be raising interest rates too rapidly, which could hurt the economy, the head of a small but rising opposition party said, as the country gears up for a general election next month. Sohei Kamiya said his Sanseito party's biggest priority was to revitalise the economy through tax cuts, particularly the consumption tax, and loose fiscal policy. With the economy still fragile, the Bank of Japan should tread cautiously in raising interest rates, Kamiya said during an interview with several media outlets on Thursday. "I think the pace of rate hikes is a bit too rapid," Kamiya said, warning that premature increases in borrowing costs could hurt the economy and small businesses. "I'm not against the BOJ's policy direction. It's a question of speed." Founded in 2020 as a fringe far-right party, Sanseito emerged into mainstream politics at last year's upper house election and is seen as potentially siphoning voters away from Prime Minister Sanae Takaichi's ruling party in the February 8 snap election. Sanseito has broadened its appeal with tough immigration policies and promises to help households struggling with rising prices. Its "Japanese First" policies echo the "America First" policies of U.S. President Donald Trump, who has repeatedly demanded larger rate cuts by the Federal Reserve. "It's important to have a division of power between the administration and central bank. On the other hand, fiscal and monetary policies aren't working hand in hand in Japan as much as they should," Kamiya said. "Focusing too much on the BOJ's independence could have a negative impact on the economy," he added. The BOJ ended a decade-long, massive stimulus in 2024 and followed up with several hikes in its short-term policy rate, including one to 0.75% from 0.5% last month, on the view that Japan was on the cusp of durably hitting its 2% inflation target. (Reporting by Takaya Yamaguchi, additional reporting and writing by Leika Kihara; Editing by Kate Mayberry)

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