Tokyo, May 14 - A member of the Bank of Japan's policy board warned on Thursday that interest rates should be raised at the earliest opportunity if incoming data fail to show a clear economic slowdown.
Kazuyuki Masu, who voted at the April policy meeting to maintain the BOJ's current stance, said he did not believe conditions at that time warranted a rushed increase in rates. "I myself judge that the situation did not warrant a hasty hike," he said in a speech. "That said, if data do not indicate clear signs of an economic downturn, I believe it is desirable to raise rates at the earliest stage possible."
Masu's comments, made after the board kept the policy rate unchanged last month, suggest he may align with the minority of board members who pushed for higher rates at the April meeting and could join those dissenting voices at the BOJ's next gathering in June.
At the April meeting, the BOJ held its policy rate at 0.75%, while three of the nine board members dissented and advocated raising the rate to 1.0%. Those dissents reflected growing concern about inflationary pressures, which officials linked to an energy shock driven by the Iran war.
Masu noted that rising prices for fuel and chemical products tied to the Iran conflict could be transitory, but he warned they also risk exacerbating distribution costs and seeding more persistent price pressures. "As the behaviour that took root during the period of deflation is now being unentrenched, Japan has clearly entered an inflationary phase," he added.
He emphasized the policy objective ahead: ensuring that underlying inflation does not overshoot the BOJ's 2% target. "Therefore, what is vital from now on is to ensure that, through timely and appropriate policy rate hikes, the underlying inflation rate does not exceed 2%."
The remarks come after the BOJ exited a decade-long, massive stimulus program in 2024 and implemented a series of rate increases, including a move in December. Those decisions were taken on the view that Japan was approaching a durable achievement of the central bank's 2% inflation goal.
Implications
If Masu and other board members press for further tightening, markets and financial institutions will be closely watching the BOJ's next policy statement and economic projections. The interaction between energy-driven price pressures and underlying domestic inflation will be central to the board's assessment of timing and magnitude of any future rate steps.