BOJ Policymaker Warns of Rapid Rate Hikes Amid Price Risks

Bank of Japan (BOJ) policymaker Kazuyuki Masu warned of price risks that may necessitate rapid rate hikes if inflation accelerates due to loose financial conditions in Japan. In a speech ahead of next week's policy meeting, Masu emphasized the need for the BOJ to pull real interest rates out of negative territory as soon as possible.

While acknowledging that underlying inflation is close to its 2% target, Masu cautioned that recent data does not show signs of a big, rapid overshoot. This suggests the BOJ may not consider a bigger-than-expected rate hike next week, although he refrained from giving explicit hints on future rate hikes.

Masu stated that it's hard to say whether financial conditions will remain accommodative after a potential rate hike to 1.25%. However, he emphasized that keeping the BOJ's policy rate below the estimated neutral range is unnatural and may lead to rapid rate hikes if inflation accelerates.