FX.co ★ BoJ Tamura Signals Gradual Rate Hikes Amid Inflation Risks

Bank of Japan board member Naoki Tamura urged caution against hastening monetary policy tightening, emphasizing the need to prevent a return to an era of stagnant prices and wages in Japan. In his address in Osaka today, Tamura highlighted the dangers of allowing inflation to extend beyond moderate levels. He stated, "Should interest rates remain excessively low relative to inflation, the real value of deposits will persistently decline, and households that do not benefit from wage increases, such as retirees, will continue to face challenges." Tamura contended that the BoJ should avoid a hasty increase in interest rates to restrictive levels but acknowledged that with inflation risks skewing upwards, the bank is now contemplating rate hikes to steer policy towards a more neutral stance. Regarding external influences, he remarked that Japan's economy would inevitably feel the impact of U.S. tariff strategies, but he expressed optimism that growth may gain momentum as global economies resume moderate expansion, with the anticipated overseas economic slowdown possibly being less severe than initially feared.