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The Bank of Japan (BOJ) is under growing pressure to raise interest rates in a timely manner as underlying inflation approaches its long-standing 2% target, according to comments from board member Kazuyuki Masu. His remarks have reinforced market expectations that Japan could see another rate hike in the near term, possibly as early as April.
Speaking to business leaders in Matsuyama, Masu said Japan’s underlying inflation is still slightly below 2% but is “drawing very close” to the central bank’s goal. He noted that companies and households are gradually abandoning deeply entrenched deflationary behavior, a major shift for an economy that struggled with low inflation for decades. Masu emphasized that continued policy rate hikes would be necessary to complete the normalization of Japan’s ultra-loose monetary policy.
His comments highlight a more hawkish tone emerging within the BOJ’s nine-member board. This shift is being driven by sustained wage growth, persistently high food prices, and a weak yen, which has increased import costs and added to inflationary pressure. Masu warned that yen-driven inflation could raise public inflation expectations and eventually feed into underlying inflation trends.
The BOJ raised its short-term policy rate to 0.75% from 0.5% in December, marking another step away from years of negative and near-zero interest rates. In recent months, some board members have openly pushed for even higher rates, reflecting internal debate over how quickly policy should tighten. Masu also pointed to processed food prices as a critical factor to watch, noting that soaring rice prices may have made consumers more tolerant of broader price increases.
While core consumer inflation reached 2.4% in December and has remained above the BOJ’s target for nearly four years, Governor Kazuo Ueda has urged caution. He continues to stress that demand-driven, wage-supported inflation may still be short of the sustainable 2% level. Nevertheless, markets are pricing in roughly a 60% chance of another rate hike in April, especially as renewed yen weakness threatens to push inflation higher.
