Tokyo - Bank of Japan board member Kazuyuki Masu says the central bank should raise interest rates as soon as possible, barring clear signs of an economic slowdown. The hawkish remarks, delivered Thursday, align him with dissenters who called for a rate hike at last month’s policy meeting.
Masu voted to keep rates steady at 0.75 percent in April. But he now says if data don’t indicate a downturn, “it is desirable to raise rates at the earliest stage possible.”
The BOJ’s next meeting is in June. Markets now price in roughly a 70 percent chance of a rate hike then.
Three of nine board members dissented in April, calling for a hike to 1.0 percent. Their concern: surging oil costs from the Iran war driving up inflationary pressures.
The yield on the 10-year Japanese government bond hit a 29-year high of 2.605 percent on Thursday. Rising fuel and chemical prices add to existing pressure from a weak yen and steady wage gains.
Masu warned that unless the BOJ acts, the underlying inflation rate could exceed the 2 percent target. He also stressed the need to pull real interest rates out of negative territory, targeting a neutral rate between 1.1 and 2.5 percent.
Japan exited massive stimulus in 2024 and raised rates multiple times, but the Middle East conflict now complicates policy by boosting energy import costs.