BOJ's Masu Signals Rapid Rate Hikes May Be Needed Amid Accelerating Inflation

The Bank of Japan (BOJ) may be forced to raise interest rates rapidly if inflation accelerates, according to Kazuyuki Masu, a board member. This warning comes as underlying inflation is nearing its 2% target and price pressures are broadening.

Masu emphasized the need for caution when gauging the distance between the BOJ's policy rate and neutral interest rates. He also highlighted the risks of maintaining unnaturally low borrowing costs, particularly if inflation accelerates.

Analysts expect the BOJ to hike rates to 1.25% next week and then to 1.75% in the second quarter of 2027. Masu's comments add to a slew of hawkish BOJ commentary and pressure from U.S. Treasury Secretary Scott Bessent that have cemented views the BOJ will raise interest rates this month.

The recent spike in producer prices warrants attention, as it could push up consumer inflation more than in the past. Masu noted that companies are actively passing on higher costs from the Middle East conflict and the weak yen, which could have a lasting effect on overall prices.