BOJ Hikes on the Horizon as Takata Demands Nimbler Rate Increases

Hajime Takata, a hawkish member of the Bank of Japan's (BOJ) board, has called for interest rate hikes to be more nimble and data-dependent in response to inflationary pressures. In a speech to business leaders in Sapporo, northern Japan, Takata said that the BOJ should shift from its current stance of encouraging a rise in underlying inflation and demonstrate its determination to prevent upward deviations in prices.

Takata was the sole dissenter to the BOJ's decision in July to keep short-term interest rates steady at 1%, calling for a rate hike to 1.25% to respond to inflationary risks from external demand shocks. He warned that the BOJ needs to carefully monitor the risk of high volatility in Japan's financial markets, particularly foreign exchange markets, due to diverging monetary policy stances between Japan and other countries.

The BOJ is set to raise rates as soon as at its two-day policy meeting through September 18, and may hike more aggressively than the current pace of roughly two times a year. Takata's comments suggest that rate hikes are becoming increasingly likely in Japan.