BOJ may be forced to hike rates rapidly if inflation accelerates, board member Masu says

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FUKUI, Japan, Sept 10 : The Bank of Japan may be forced to raise interest rates rapidly if inflation accelerates as the country's financial conditions remain accommodative, board member Kazuyuki Masu said on Thursday.

A recent spike in producer prices warrants attention, as it could push up consumer inflation more than in the past, with companies actively passing on higher costs from the Middle East conflict and the weak yen, Masu said.

Rising fuel and chemical prices from the war in Iran could push up transportation costs which, coupled with rising food prices, could have a lasting effect on overall prices, he said.

"Financial conditions in Japan remain accommodative. If inflation accelerates here, there is a risk we might inevitably need to rapidly raise interest rates," Masu said in a speech.

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Masu said underlying inflation has yet to reach, but is quite close to, the BOJ's 2 per cent target.

"I am convinced the BOJ needs to raise its policy rate further as it falls solidly within the estimated range of the neutral interest rate, thereby ensuring the flexibility needed to swiftly adjust the policy rate in either direction, depending on economic conditions," he said.

The BOJ is expected to hike interest rates to 1.25 per cent on September 18 and then to 1.75 per cent in the second quarter of 2027 — earlier than previously thought — a Reuters poll showed, amid persistent concerns over broadening price pressures and yen weakness.

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