MUFG CEO Warns Weak Yen Could Spark Inflation, Undermining Japan’s Growth Plan

Junichi Hanzawa, chief executive of Mitsubishi UFJ Financial Group, said a sustained yen decline could generate widespread inflation, erode real wages and depress consumer spending, a “minus to sustainable economic growth.”

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Japan has spent three decades battling deflation after the early-1990s asset-bubble collapse, a period of stagnant wages and low price expectations. In June, the Bank of Japan lifted its policy rate to 1%, a 31-year high, yet the yen fell to a 40-year low of 162.66 per dollar.

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Junichi Hanzawa heads MUFG, Japan’s largest banking group, and frequently comments on monetary policy. Prime Minister Sanae Takaichi has unveiled an economic programme that includes sector-specific investment and a temporary cut to the food consumption tax, while favouring low interest rates to support fiscal expansion.

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• The yen hit 162.66 per dollar, a 40-year low.

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• Real wages have been negative for four consecutive years, ending 2025.

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• Core inflation in Tokyo rose in June, spurred by the U.S.–Israeli war on Iran and global energy disruptions.

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• The Bank of Japan’s policy rate stands at 1%.

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The Bank of Japan said it will keep raising rates to keep inflation near its 2 % target despite the yen’s slide. The government’s programme, outlined by Prime Minister Takaichi, pairs sector investment with a temporary food-tax cut to boost demand while containing price pressures.

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• “I'm extremely troubled by the prospect of a weakened yen leading to widespread, sustained inflation in Japan,” — Junichi Hanzawa, MUFG CEO

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• “If price rises exceed real wages, that will hit consumption. This would be a minus to sustainable economic growth. That's my greatest concern,” — Junichi Hanzawa, MUFG CEO

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• “I think it is extremely important to curb inflation so as to prevent negative real incomes,” — Junichi Hanzawa, MUFG CEO

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Hanzawa’s warning highlights a risk that inflation outpacing wages could cut household spending, weakening the demand boost sought by Takaichi’s fiscal measures. Persistent price pressure may also force the Bank of Japan to tighten further, raising borrowing costs for firms and households and potentially slowing investment and employment recovery. Hanzawa emphasized that unchecked inflation could push real incomes into negative territory, further weakening consumer demand.

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The Bank of Japan is expected to continue rate hikes, while the Takaichi administration will roll out its sector-investment plan and the temporary food-tax cut in the coming months. Analysts will monitor yen movements and wage data for signs that inflation is becoming entrenched, which could prompt additional monetary tightening.

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