Thu Sep 12 01:38:44 UTC 2024: ## Bank of Japan Policymaker Calls for Interest Rate Hike to 1%

**OKAYAMA, JAPAN:** A prominent member of the Bank of Japan’s (BOJ) policy board, Naoki Tamura, has urged the central bank to raise interest rates to at least 1% by the second half of the next fiscal year (starting April 2025). This statement marks the first time a BOJ official has publicly specified a target rate for short-term borrowing costs.

Tamura, considered one of the more hawkish members of the board, believes that Japan’s economy is showing signs of achieving the BOJ’s 2% inflation target sustainably. He also estimates that the country’s neutral interest rate, the rate that neither stimulates nor dampens the economy, is around 1%. This has led him to advocate for a gradual increase in interest rates to achieve this level, allowing the BOJ to maintain its price goal.

Tamura’s comments come amidst recent calls from other BOJ board members for continued tightening despite volatility in global markets. While the central bank is expected to hold rates steady at its next meeting on September 20th, over half of economists polled by Reuters anticipate further tightening by the year’s end.

The BOJ’s shift towards a more hawkish stance follows its decision in March to abandon negative interest rates and raise short-term rates to 0.25% in July. This move was driven by growing confidence in the economy’s progress towards achieving its inflation target. Governor Kazuo Ueda has indicated a willingness to raise rates further if inflation remains around 2% and is accompanied by solid wage gains.

Tamura’s concerns about rising inflation risk stem from the escalating labor shortages that are pushing firms to raise wages and pass on increased costs to consumers. He emphasizes the need for a measured and gradual approach to raising interest rates, with the central bank closely monitoring the impact of each move on economic activity.

The BOJ’s decision to raise rates, following a prolonged period of easing, reflects the global trend of central banks tightening monetary policy to combat inflation. However, the path to achieving this goal in Japan is likely to be gradual and carefully monitored, ensuring that the economy remains on a stable path to achieving its inflation target.

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