Bank of Japan must raise rates to 1% by latter half of fiscal 2025, board member Tamura says

THE Bank of Japan must raise short-term interest rates to at least 1 per cent by the second half of fiscal 2025 to contain inflation risks, board member Naoki Tamura said on Thursday.

Tamura, a former commercial banker known as among the most hawkish members of the board, said inflationary risks were building up that required lifting the BOJ’s policy rate to levels deemed neutral to the economy.

By the latter half of fiscal 2025, Japan’s economy will reach a point where it can be judged that the BOJ’s 2 per cent inflation target will be sustainably achieved as annual wage negotiations should confirm broad-based pay increases including for smaller firms, he told a news conference.

“Bearing in mind that short-term interest rates should be at 1 per cent by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

The Bank of Japan raised rates last month to 0.5 per cent, their highest since the 2008 global financial crisis. REUTERS