A former Bank of Japan executive director in charge of monetary policy has indicated that the BOJ could raise its benchmark interest rate for a second consecutive month at its October policy meeting, moving sooner than most economists anticipate.
Kazuo Momma, a former executive director, said in an interview on Friday: "The basic pace will most likely be one rate hike every three months, but there is also a reasonable possibility that the central bank could raise rates at consecutive meetings. I think that probability is around 20% to 30%."
Momma's remarks came just one week after the policy board led by BOJ Governor Kazuo Ueda completed a rate hike. Only three months had passed since the June increase, marking an acceleration from the previous pace of roughly once every six months.
Ueda explained that the BOJ has entered a new phase, with its policy focus shifting from pushing core inflation up to 2% toward guarding against inflation overshooting that target.
Momma stated that these comments were intended to send a signal to the market: as the policy focus shifts, faster rate hikes may be on the way.
Momma said: "The BOJ has been placing heavy emphasis on the risk that core inflation could break above 2%. From that perspective, I believe this risk will not diminish over the next three months; rather, it is more likely to rise."
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