The Nikkei Stock Average has reached the 40,000 yen mark for the first time in history.

One of the reasons behind this is the growing expectation of a US interest rate cut among investors around the world.

On the other hand, stock prices have also plummeted due to reports regarding the Bank of Japan's decision to lift negative interest rates.



Similarly, Thailand is a Southeast Asian country where the future of monetary policy is a focus.

This is a heated debate between the government and the central bank, which are pressing for an emergency rate cut.



When I listened to the discussions and the situation, which could be called a battle between the government and the central bank, I learned a lot.



(Asia Bureau Reporter Neil Kato)

Prime Minister's strong demand for interest rate cuts

Posted by X (former Twitter)


: "Thailand's economy is in crisis. I would like to request that a monetary policy meeting be convened urgently to consider interest rate cuts without waiting for the scheduled meeting (in April)."

The message is a strong call for the central bank to cut interest rates, and the person making the call is Thailand's Prime Minister Setar.



The trigger was Thailand's 2023 GDP = Gross Domestic Product, which was announced on February 19th when I posted this X.

The actual growth rate was 1.9% compared to the previous year, far short of the 5% target set by the prime minister.



I guess I couldn't stand it.



The central bank's monetary tightening was the main issue.



In order to curb inflation, interest rates have been raised eight times in a row since August 2022, leading to sluggish corporate capital investment and personal consumption.

"Let's meet every week for coffee."

The criticism against central banks has been growing since the beginning of the year.



January 10, 2024.



Prime Minister Setar summoned Central Bank Governor Setaput to the Prime Minister's Office and had a secret meeting with him.

Governor Setaput (left) and Prime Minister Setar (right)

Although the Prime Minister showed consideration for the independence of the central bank, he also pointed out the negative effects of high interest rates, and after the meeting, he called on the Prime Minister to ``Let's meet every week for coffee.I can also come to the central bank's headquarters.'' I did.

The central bank remains unmoved; there is no “crisis situation”

How will the central bank respond to the government's demand for interest rate cuts?

At the monetary policy meeting held on February 7, which attracted a lot of attention, it was decided to leave the policy interest rate unchanged.



The central bank stated that ``Thailand's domestic demand continues to expand,'' indicating that the Thai economy was not in a ``crisis situation.''



Furthermore, he argues that future growth requires structural reforms such as improving productivity, and that lowering interest rates is not the answer to these "external and structural factors."



What kind of person is Governor Setaput, who heads the central bank?

When he was a child, he lived abroad for a long time with his father, who was a diplomat, and completed a doctoral course in economics at Yale University in the United States.



He has served as a senior economist at the World Bank and president of an asset management company in Thailand, and is known as a person well versed in international finance.



Governor Setaput is cautious about lowering interest rates because he is wary of a resurgence of currency depreciation.



Thailand suffered a currency depreciation due to the rapid rate hike in the United States, and was forced to follow suit in order to protect its currency.



There are concerns that if Thailand decides to cut interest rates ahead of the US, it could lead to another currency depreciation.



Concerns about fiscal deterioration have also been raised.

Thailand's public debt to GDP ratio will be 62% as of the end of January 2024.



This has increased from 40% before the coronavirus pandemic.



Prime Minister Setar is also trying to come up with a policy that has a strong sense of disparity.



The central bank plans to distribute digital money worth approximately 40,000 Japanese yen per person to 50 million people, and the central bank has expressed concerns that the deterioration of finances could lead to currency depreciation.



Toru Nishihama of Dai-ichi Life Economic Research Institute, an expert on emerging economies, points out that Thailand's central bank is easily influenced by the external environment and is being forced to make difficult decisions.

Toru Nishihama, Chief Economist, Dai-ichi Life Economic Research Institute


: ``After the Asian currency crisis, Thailand has improved its structure to stabilize exchange rates, but exchange rates and capital flows are easily influenced by Western monetary policies.'' If a central bank, which is the guardian of the currency, is suspected of allowing government intervention, it will lose confidence in the market.

Fate surrounding independence?

Thailand's public media, PBS, also reports on the fate surrounding the central bank's independence.

Governor Setaput was reportedly invited by the World Bank to the Thai Ministry of Finance in order to respond to the Asian currency crisis that occurred in 1997.



At this time, Mr. Chatmongkol, who later became the governor of the central bank, summoned Mr. Setaput.



However, in 2001, Chatmongkol was fired from his post due to a conflict with Prime Minister Thaksin Shinawatra over monetary policy.



PBS reports, ``If the same thing happens to Governor Setaput, history will repeat itself.This is a challenge to protect the independence of the central bank.''

Can we have a healthy discussion?

What about the United States, which is being closely watched by the Bank of Thailand?

Photographed in September 2018

In 2018, while in office, former President Trump criticized the Federal Reserve, which continues to raise interest rates, saying, ``I think they're making a mistake. I think the Fed has gone crazy. I don't agree with it at all.'' Members of Congress are also calling on the Federal Reserve to lower interest rates, saying that mortgage rates are too high.



In Japan, former Prime Minister Abe said in 2022, ``The government has the Bank of Japan buy government bonds through commercial banks.They must be returned at maturity, but since the Bank of Japan is a subsidiary of the government, the government can refinance them no matter how many times. I don't care,'' he said, causing a stir.



The ``Tell Me! Nichigin'' section of the Bank of Japan's homepage has the following statement regarding the independence of the Bank of Japan.



"The history of each country shows that central banks are susceptible to pressure to implement accommodative monetary policy."



The Bank of Japan has continued to implement monetary easing measures for many years, and will it now decide to lift negative interest rates? Please, we are reaching a major milestone.



Listening to the interactions between the government and the central bank in Thailand, I am reminded of the importance of healthy discussion.

Featured plans

In Japan, the 13th is the day for intensive responses to the spring labor union.



The focus is on whether the momentum of corporate wage increases will continue and lead to a policy shift by the Bank of Japan.