Macmillan Jones - US Rate Hikes May Be Good for Global Economy

Macmillan Jones - Japan battles to achieve inflation target but US rate increase could help world economy.

Haruhiko Kuroda, Governor of the Bank of Japan recently dismissed worries that elevated borrowing costs in the US would be harmful to Asian economies when he stated that steady rate increases by the US Federal Reserve would have a positive impact on the global economy.

Analysts at Macmillan Jones say the BoJ governor showed less optimism towards the issue of worsening trade tensions between the US, China and other major economies.

Macmillan Jones analysts say an elderly population could cause structural problems for Asian central banks. The aging population trend in Asia has been a cause for concern for some time as it hinders potential economic expansion and calls for greater monetary stimulus to boost growth. Aging society is also becoming a challenge for many European and emerging economies.

While the IMF recently stated that more rigid financing conditions could pose a serious threat to emerging and developing economies, Kuroda is of the opinion that US interest rate hikes would have a positive impact on the world’s economy as it reflected a strengthening US economy.

Macmillan Jones analysts say US inflation is already nearing the Federal Reserve’s target and that the economy is showing signs of growth as the Fed takes steps to normalize monetary policy.

The Bank of Japan is facing a different problem as it struggles to reach its inflation target of 2 percent and the BoJ governor has stated that he intends to maintain a large scale stimulus program in Japan for the interim period.

Source: Macmillan Jones

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