BoJ's Tamura: Expects gradual path for interest rate hikes

The Bank of Japan (BoJ) board member Naoki Tamura crossed the wires during the Asian session on Thursday, saying that the path towards ending the easy policy is still very long.

Key Quotes:

Japan's neutral rate is likely to be around 1% at the minimum.

Will carefully examine the pros and cons of exiting easy policy.

Must push up short-term rates at least to around 1% by latter half of our long-term forecast period through fiscal 2026, to stably achieve 2% inflation target.

Must raise short-term rates in several stages while scrutinising how economy, inflation respond to such steps.

Will keep close eye out on financial market moves and their impact on economy, prices.

Must raise rates at appropriate timing and in several stages.

Pace at which markets expect boj to hike rates is very slow, hiking at such pace could further heighten upward inflation risk.

Expect consumption to rise moderately thanks in part to reversal of one-sided, sharp Yen falls.

Likelihood of japan sustainably achieving BoJ’s price target heightening further.

Personally see upward inflation risk heightening.

Market Reaction:

The hawkish remarks reaffirm market expectations for an additional interest rate hike by the BoJ in 2024 and offer some support to the Japanese Yen (JPY), capping the USD/JPY pair's recovery from a multi-month low near the 143.00 mark.