BoJ Board Member Tamura said it is important to push the BoJ’s policy rate closer to neutral to avoid being forced to hike rates sharply later

Says: Japan’s neutral rate is around 2%. His view is for the BoJ to raise its policy rate once every few months towards a neutral level of around 2%. If upside price risks become more likely to materialise, the BoJ should not hesitate to speed up rate hikes or raise rates by a larger amount. Underlying inflation has already reached 2%. Regardless of developments in the Middle East, upside risks to prices remain. The BoJ is in a different position to the Fed and ECB because its policy rate is still below neutral and inflation expectations are not sufficiently anchored. Voted against the BoJ’s decision to pause tapering from next fiscal year as the BoJ should normalise the balance of its bond holdings as soon as possible. Recent rise in long-term rates is consistent with fundamentals and reflects market participants’ views on inflation, as well as the monetary and fiscal policy outlook. Premature to begin specific discussions now, but the BoJ should debate appropriate reserves level in the future. Inflation expectations have roughly reached 2% and continue to heighten further.