BANK of Japan board member Naoki Tamura said on Thursday the central bank must raise short-term interest rates to at least around 1 per cent to avoid inflationary risks from materialising.
“We must raise interest rates at an appropriate timing, 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 per cent.
Tamura said the likelihood of Japan’s economy sustainably achieving the BOJ’s 2 per cent inflation was improving, which meant the central bank must raise interest rates to levels deemed neutral to the economy by around late 2025.
He said Japan’s neutral rate of interest, or the level that neither cools nor stimulates the economy, is estimated to be at least around 1 per cent.
“As such, it’s necessary to push up our short-term policy rate at least to around 1 per cent,” by around the latter half of fiscal year ending March 2026 to sustainably achieve the BOJ’s price goal, he said. REUTERS
