Anton Bridge and Miho Uranaka
(Reuters) – The head of Mizuho Financial Group Inc's banking unit said the Bank of Japan could raise interest rates twice by the end of March 2025 to reach 0.5 percent, to reflect Japan's economy's real growth rate.
But a rapid rate hike would not be enough to halt the yen's plunge to its lowest level against the dollar in 38 years, Mizuho Bank Chief Executive Officer Masahiko Kato told Reuters in an interview.
Kato said, “If the Bank of Japan raises interest rates too significantly, it will worsen economic growth, which has finally gotten on track,” and added, “I don't think the Bank of Japan will raise interest rates too quickly.”
The central bank ended negative interest rates for the first time in eight years in March, but economists are divided on whether further rate hikes will come at its next monetary policy meeting later this month.
Kato said inflation will lead to higher costs for companies, forcing them to raise wages, but it will also encourage them to adopt new growth strategies such as mergers and acquisitions (M&A), carve-outs and overseas expansion to boost profits.
Mizuho Bank is positioning mid-sized listed companies as a new client base for its lending and advisory services, as Japan's severe labor shortage means many of them lack the expertise to pursue growth through M&A and other means.
Kato pointed out that the reason so many companies are struggling to increase their corporate value after listing is due to increased involvement in Japanese companies by activist investors and the Tokyo Stock Exchange's campaign to increase corporate value.
Mizuho launched a seven-person team to support the growth of medium-sized businesses last year, and in April it became an independent department with 70 people.
Kato said, “Until now, we have been allowed to have little thought given to increasing corporate value.”
“But with the Tokyo Stock Exchange reforms and the economy starting to move again, suddenly the conditions were right.”
(Reporting by Anton Bridge and Miho Uranaka; Editing by Sonali Paul)