BOJ Board Member Calls for Further Rate Hikes Amid Inflation Concerns

Bank of Japan board member Kazuyuki Masu has stated that interest rates must continue to rise in order to prevent inflation from exceeding 2%. This view is in line with market expectations, which are currently pricing in a 97% chance of a rate hike at the BOJ's monetary policy meeting on September 18. The central bank's benchmark interest rate is currently set at 1%, and markets are predicting a 0.25 percentage point increase.

According to Masu, underlying inflation is nearing 2%, and continued tightening is necessary to prevent prices from rising further. He pointed out that the war in Iran is driving up fuel and chemical prices, which in turn is causing higher transport costs for imported raw materials and rising fertilizer prices, pushing up food prices.

Recent economic data has also supported the case for further tightening. Japan's second-quarter gross domestic product growth was revised up to an annualized 1.4%, while wage growth in July reached its highest level in about 30 years.