Naoki Tamura, the Bank of Japan’s most hawkish board member, signaled that the central bank could implement two or more interest rate hikes in the upcoming fiscal year, which starts in April, in an effort to address potential upside risks to the inflation target.
During a speech to local business leaders in Nagano, central Japan, on Thursday, Tamura stated, “The short-term interest rate should be at the 1 percent level by the second half of fiscal 2025.” He emphasized the need for the BOJ to raise rates “in a timely and gradual manner” in response to increasing prospects of meeting the central bank’s inflation stability target.
Tamura also reiterated his belief that the neutral interest rate is at least 1%. He pointed out that with the current rate at 0.75%, it remains negative in real terms, suggesting there is still room for further rate hikes. His comments come on the heels of the BOJ’s decision last month to raise its benchmark rate to 0.5%, with the central bank signaling further rate increases should the economic outlook unfold as expected.
The yen saw a brief spike, strengthening to 151.82 against the dollar following the release of Tamura’s speech text, up from around 152.30 just prior.
Tamura has long been recognized as the most hawkish member of the BOJ’s nine-member board. Notably, he was the only member to propose a rate hike in December, a month before the bank followed through on that move.
In his speech, Tamura further stated, “Now is the time for the Bank to ease off slightly from pressing hard on the accelerator of monetary easing.”
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