FX.co ★ BoJ Hawk Tamura Calls for Rate Hike Every Few Months

Bank of Japan board member Naoki Tamura said in a speech that the central bank should continue raising interest rates every few months, gradually guiding the policy rate toward a neutral level of around 2%, compared with the current 1%. He argued that inflationary pressures are likely to strengthen regardless of tensions in the Middle East, adding that higher import costs are expected to feed through to consumer prices more quickly and more broadly than after Russia’s 2022 invasion of Ukraine. This, he said, reflects a shift in how companies set prices.

“Considering the recent increase in upside risks to prices, what I envisage as a baseline path is raising the policy interest rate by 0.25 percentage points at intervals of a few months toward the neutral interest rate level of 2%,” Tamura said. He added that if inflation risks intensify, the Bank of Japan should “accelerate the pace of rate hikes without hesitation,” either by increasing the frequency of moves or by opting for larger increments.