BOJ Policymaker Warns Rapid Rate Hikes Possible Amid Inflation Concerns

BOJ policymaker Kazuyuki Masu warned of potential price risks that could lead to rapid interest rate hikes if inflation accelerates in Japan. In a speech ahead of next week's policy meeting, Masu stated that underlying inflation is 'very close' to the country's 2% target and emphasized the need for the BOJ to pull real interest rates out of negative territory.

Masu noted that recent data does not show signs of a big, rapid overshoot in inflation, suggesting that the BOJ may not raise interest rates by more than expected next week. However, he stressed the importance of carefully gauging how close the BOJ's policy rate is to neutral levels at each meeting.

The BOJ has raised interest rates to a 31-year high of 1% in June and signaled a strong chance of a near-term hike due to mounting price pressures from the Middle East war and a weak yen. Analysts expect the BOJ to hike rates to 1.25% next week and then to 1.75% in the second quarter of 2027.