Bank of Japan’s Tamura
- BOJ should push rates closer toward levels deemed neutral
- Growth rate of Japan’s economy is likely to rise, with overseas economies returning to a moderate growth path
- Don’t need to raise rates sharply, tighten monetary policy now when there are both upside, downside risks
- My view is that there is a strong possibility that the slowdown in overseas economies will not be as significant as initially expected
- Given upside price risks, BOJ should push up rates closer toward neutral to avoid being forced to hike rates sharply in the future
- Inflation may deviate upward from the baseline scenario
- Inflation risk is mounting in Japan
- Many firms appear to be maintaining a proactive fixed investment stance
- Higher food prices should not be regarded as merely a temporary factor, and they require close monitoring
- Japan’s real interest rate remains in negative territory
- There is a significant risk that domestic price developments will deviate upward from the outlook presented in the July 2025 outlook
- Believe Japan’s neutral rate is at least 1%
- Believe that the policy interest rate is still far away from the neutral interest rate
- Hard to judge where neutral rate is, so BOJ has little choice but to gradually raise rates to find out where above 1% it actually lies
- It has become more likely that the price stability target will be achieved earlier than expected
- We are in a phase where we should decide raising rates to move it closer to neutral
USD/JPY is back down towards its earlier lows after this from Tamura. Tamura was always going to sound less dovish than other Board members, as noted (see below) he was in favour at a hike at the Bank’s September meeting.
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BOJ policy board member Naoki Tamura meeting with local leaders in Okinawa, Japan.
- He is one of two BoJ policy board members who dissented from the BOJ’s decision to hold policy rates steady at last month’s meeting.
- Both members signaled they believe the central bank is ready for another rate increase
This article was written by Eamonn Sheridan at investinglive.com.
