BOJ’s Tamura calls for rate hike to at least 1% Reuters

By Leica Kihara

OKAYAMA, Japan (Reuters) – Bank of Japan board member Naoki Tamura said on Thursday the central bank needs to raise short-term interest rates to at least about 1 percent to avoid inflationary risks materializing.

“We need to raise interest rates at an appropriate time and in several stages,” Tamura said in a speech to business leaders in Okayama, western Japan.

The BOJ last raised short-term interest rates in July and now sets its policy rate at 0.25%.

Tamura said the likelihood of Japan’s economy sustainably reaching the BOJ’s 2 percent inflation target is improving, meaning the central bank needs to raise interest rates to levels considered neutral for the economy by the end of 2025.

He said Japan’s neutral interest rate, or the level that neither cools nor stimulates the economy, is expected to be at least around 1 percent.

“As such, it is necessary to raise our short-term policy rate by at least around 1%” around the second half of the fiscal year ending March 2026 to sustainably achieve the BOJ’s price target, a he said.