FX.co ★ BoJ Eyes Further Rate Hikes Amid Persistent Cost Pressures

Bank of Japan board member Kazuyuki Masu said the central bank is likely to continue raising its policy rate and recalibrating monetary accommodation as underlying inflation moves closer to its 2% target. Speaking in Fukui on Thursday, he stressed that the pace of rate increases will depend on progress toward the baseline outlook presented in July, as well as on risks stemming from crude oil prices, AI-driven demand, and foreign-exchange fluctuations.

Masu cautioned that higher fuel and chemical costs linked to the situation in Iran could prove more than temporary, given their potential to push up distribution and related expenses. He also highlighted ongoing upward pressure on food prices from rising domestic logistics and shipping costs, as well as more expensive imported fertilizer, underscoring concerns about persistent inflation.

According to Masu, recent rate hikes have not damped corporate funding demand, which has instead continued to grow, although he warned of the risk of overheating in business investment. While households overall maintain a net surplus of assets, he noted that younger borrowers are shouldering heavier housing-loan burdens, even as wage growth has strengthened.