A Bank of Japan Policy Board member, Masakazu Shiokawa, stated on Thursday that the central bank should raise interest rates as soon as possible if the economy shows no clear signs of slowing down, noting that opinions were divided at the April policy meeting.
Shiokawa had voted to keep interest rates unchanged at the April meeting, but his latest remarks suggest he may join the dissenting camp in calling for a rate hike at the BOJ's next meeting in June.
In a speech on Thursday, Shiokawa said, "Personally, I believe the current situation does not warrant a hasty rate increase. That said, if the data does not show clear signs of an economic downturn, I think it is advisable to raise rates sooner rather than later."
Last month, the Bank of Japan kept its policy rate unchanged at 0.75%, but three out of nine board members dissented, calling for a rate hike to 1.0%. This indicates the central bank's growing concern over inflationary pressures stemming from energy shocks triggered by the conflict in Iran.
Shiokawa noted that the rise in fuel and chemical product prices due to the Iran conflict might be only a temporary shock, but there are concerns that it could push up already elevated distribution costs and lead to sustained price pressures.
He added, "As consumption habits formed during the deflationary period gradually unravel, Japan has clearly entered an inflationary phase. Therefore, it is crucial from now on to ensure that underlying inflation does not exceed 2% through timely and appropriate policy rate hikes."
The Bank of Japan ended its decade-long massive stimulus program in 2024 and has raised its policy rate multiple times, including in December last year, citing Japan's nearing achievement of the 2% inflation target.
Comments