Written by Leika Kihara
OKAYAMA, Japan (Reuters) – Bank of Japan board member Naoki Tamura said on Thursday the central bank must raise short-term interest rates to at least 1 percent to prevent inflationary risks from escalating.
“We should raise interest rates at the right time, and in several stages,” Tamura said in a speech to business leaders in Okayama, western Japan.
The BOJ last raised short-term interest rates in July and now sets its policy rate at 0.25%.
Tamura said the chances of the Japanese economy sustaining the BOJ's 2% inflation rate are improving, meaning the central bank must raise interest rates to levels considered neutral to the economy by late 2025.
He said Japan's neutral interest rate, or a rate that does not cool or stimulate the economy, is estimated to be at least 1%.
“Therefore, it is necessary to raise our short-term policy rate to at least 1%,” around the last quarter of the fiscal year ending in March 2026 to meet the BOJ's rate target, he said.
