BOJ Board Member Calls for Further Rate Hikes to Contain Inflation

Bank of Japan (BOJ) policy board member Kazuyuki Masu has emphasized the need for further interest rate increases to prevent inflation from overshooting its target. Speaking in Fukui Prefecture on Thursday, Masu noted that Japan's underlying inflation is 'very close' to the central bank's 2 percent target and argued that the current policy rate of 1.0 percent remains below the neutral interest rate estimated between 1.1 percent and 2.5 percent.

Masu warned that ongoing conflict in the Middle East, particularly involving Iran, could lead to enduring increases in fuel, chemical, and transportation costs. He also cited the depreciation of the yen as having a more pronounced effect on domestic prices than in previous economic cycles, as well as soaring global demand related to artificial intelligence driving up the cost of semiconductors, copper, and power-generation equipment.

Masu stated that 'to complete the normalization of monetary policy in Japan, I am convinced that the bank needs to raise the policy interest rate further.' He advocated for steady, incremental increases now to avoid drastic measures later. Market expectations are solidified for a potential rate hike at the BOJ's upcoming monetary policy meeting.