BOJ Board Member Warns Rapid Rate Hikes Possible if Inflation Accelerates

BOJ Board Member Kazuyuki Masu has warned that Japan's financial conditions remain accommodative and may require rapid rate hikes if inflation accelerates.

Masu pointed to a recent surge in producer prices, which could lift consumer inflation more than in past episodes as companies pass on higher costs tied to the Middle East conflict and the weak yen.

Rising fuel and chemical prices stemming from the war in Iran could drive up transportation costs, together with climbing food prices, having a lasting impact on overall prices.

Masu noted that underlying inflation has not yet reached the BOJ's 2% target but is quite close to it. He emphasized that the central bank needs to raise its policy rate further since it falls solidly within the estimated range of the neutral interest rate, giving the BOJ flexibility to adjust the policy rate swiftly in either direction depending on economic conditions.