BOJ’s Tamura flags possible rate hike amid rising inflation risks

Naoki Tamura, the Bank of Japan's (BOJ) board member, stated that the central bank may be forced to raise interest rates if inflation risks increase, despite ongoing economic uncertainty.

Tamura spoke shortly after the release of comments from participants of the latest BOJ meeting. According to the document, officials see no need to rush into raising borrowing costs. However, more policymakers are noting a faster-than-expected pace of price growth in the country.

Tamura considers it unlikely that the bank will hike rates while the trade negotiations with the US are still ongoing. However, he believes that such a possibility cannot be completely ruled out, especially if officials start to worry about losing progress in the fight against inflation.

In a previous statement, Tamura estimated that Japan's neutral rate is at least around 1%, and it should be set at that level when the target for consumer price growth is reached.

Currently, the Bank of Japan expects to reach its inflation target around the second half of a three-year projection period ending in March 2028. Tamura, known for his most hawkish views among central bank policymakers, noted that this could happen sooner.