Masu’s comments add to a hawkish tilt already building among BOJ board members ahead of the September meeting, reinforcing market expectations that a hike is likely, indeed abasically set in stone. His specific focus on the weak yen having a bigger inflation impact than in the past, alongside concern about producer prices feeding through to consumer inflation more than historically, gives the yen some support on the margin, since it signals the board is not just reacting to headline energy costs but building a broader case for policy normalisation.
With the policy rate already described as approaching the estimated neutral range, the more market sensitive signal here may be Masu’s comment that the BOJ could be forced to raise rates rapidly if inflation accelerates, which raises the stakes around upcoming data releases between now and the meeting, and beyond.
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Earlier:
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A BOJ board member who has already called for early hikes says the case for continuing to raise rates keeps getting stronger, not weaker.
Summary:
- Kazuyuki Masu, a Bank of Japan board member since July 2025 and a former chief financial officer at Mitsubishi Corp, said underlying inflation remains below 2% but is getting close, and that the BOJ is expected to continue raising rates given still accommodative financial conditions
- Masu is generally seen as one of the more hawkish voices on the board. He voted to keep rates steady in April but said in May he believed the BOJ should hike as soon as possible absent clear signs of an economic slowdown, so today’s comments extend rather than reverse that stance
- He said the pace and timing of hikes will depend on the likelihood of meeting the BOJ’s baseline projections, with a close eye on oil prices, AI related demand and currency moves, while stressing the most important goal is avoiding a sharp overshoot of inflation above 2%
- Masu flagged that rising fuel and chemical prices could prove a one off shock but may broaden through distribution costs, and separately warned that Middle East driven cost increases could push up prices on a more sustained trend
- He noted a recent 7% spike in producer prices warrants attention, said food prices are likely to reaccelerate, and said the weak yen is having a bigger impact on inflation than in the past
- Masu said Japan is no longer in deflation and the BOJ must move its real interest rate out of negative territory as soon as possible, and that with the policy rate nearing its estimated neutral range, financial, price and job conditions all need careful monitoring, with the BOJ’s next policy meeting scheduled for September 17 to 18
Bank of Japan board member Kazuyuki Masu said underlying inflation remains below the central bank’s 2% target but is now quite close to it, adding that the BOJ is expected to continue raising interest rates given how accommodative financial conditions remain. His comments come ahead of the BOJ’s next policy meeting on September 17 and 18, which markets widely expect to produce a further rate hike.
Masu, a former chief financial officer at trading house Mitsubishi Corp, joined the BOJ board in July 2025, filling a seat traditionally reserved for a business executive. He is generally regarded as one of the more hawkish members of the current board. He voted to keep rates unchanged at the BOJ’s April meeting, but said the following month that he believed rates should rise as soon as possible provided there were no clear signs of an economic slowdown, so his comments are consistent with that stance rather than a shift in it.
On the substance, Masu said the pace and timing of further rate increases would depend on the likelihood of achieving the BOJ’s baseline inflation projections, alongside risks tied to oil prices, AI related demand and currency fluctuations. He said the most important consideration is avoiding a sharp overshoot of underlying inflation above the 2% target. He also addressed the current run up in energy costs directly, saying that while a rise in fuel and chemical goods prices could prove to be a one off shock, it may still have a broader impact on prices through distribution costs, and separately flagged concern that rising costs stemming from the Middle East conflict could push up overall prices as a lasting trend rather than a temporary one.
Masu pointed to several additional pressures worth watching, including a recent 7% spike in producer prices, which he said could feed through to consumer inflation more than it has historically, alongside an expected reacceleration in food prices that he described as potentially key to the long term inflation outlook. He also said the weak yen is having a larger impact on inflation than in the past and therefore warrants close attention, and separately noted no sign yet that recent rate hikes are denting corporate appetite for funds, adding he was watching for signs that corporate investment could be overheating.
On the policy framework itself, Masu said Japan is no longer in deflation and that the BOJ must move its real interest rate out of negative territory as soon as possible. With the policy rate now approaching the BOJ’s estimated neutral range, he said the central bank needs to watch price, job and financial conditions carefully, and warned that if inflation accelerates, the BOJ could be forced to raise rates more rapidly than currently anticipated. He also flagged a separate, longer term question facing the BOJ over which maturity range of Japanese government bonds it should continue holding as it considers the desirable size of its balance sheet.
This article was written by Eamonn Sheridan at investinglive.com.