BOJ may need swift rate hikes if inflation accelerates, board member Masu says

Speaking on Thursday, Bank of Japan board member Kazuyuki Masu said the central bank could be compelled to lift interest rates swiftly should inflation accelerate, given that the nation’s financial conditions are still accommodative.

Masu drew attention to the recent climb in producer prices, warning it may push consumer inflation higher than in previous episodes as firms move to pass along increased costs linked to the Middle East conflict and the weak yen, Reuters reported.

He noted that elevated fuel and chemical costs stemming from the war in Iran could raise transportation expenses and, alongside higher food prices, potentially exert a prolonged impact on prices overall.

Masu said underlying inflation has not yet hit the BOJ’s 2% target, though it is fairly close to it.

Japanese producer inflation climbed sharply this year as soaring oil prices fed into higher business costs. Although government subsidies shielded consumer inflation directly from rising fuel prices, companies in Japan are still anticipated to pass on their higher costs to consumers.

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