BOJ Must Hike Rates at Every Meeting to Stem Yen Slump

Former Finance Ministry official Takehiko Nakao believes that the Bank of Japan should raise its benchmark interest rate at every meeting to narrow the rate differential with the US and ease pressure on the yen.

Nakao, who was vice-finance minister for international affairs until March 2013, made these comments on a TV Tokyo programme on August 17. He noted that real interest rates in Japan are still negative despite the policy rate being raised to 1 per cent.

Compared to other countries, where inflation is positive, Nakao argues that Japan's policy rate should be above 2 per cent.

With the government supporting a near-term rate hike and traders pricing in a 79 per cent chance of an increase on September 18, attention is turning to whether the central bank could accelerate its pace of tightening.