BOJ Board Member Warns Rapid Rate Hikes May Be Needed Amid Accelerating Inflation

Japanese financial conditions remain accommodative, according to Bank of Japan (BOJ) board member Kazuyuki Masu. If inflation accelerates in the country, there is a risk that interest rates may need to be raised rapidly.

Masu pointed out that a recent spike in producer prices warrants attention, as it could lead to higher consumer inflation. This is particularly concerning given that companies are actively passing on increased costs from the Middle East conflict and the weak yen.

Companies may pass on higher fuel and chemical prices due to the war in Iran, which could push up transportation costs. Coupled with rising food prices, this could have a lasting effect on overall prices.

The BOJ is expected to hike interest rates to 1.25 per cent on September 18 and then to 1.75 per cent in the second quarter of 2027 amid persistent concerns over broadening price pressures and yen weakness.