BOJ could raise rates every quarter, ex-policymaker says

Business Recorder reported that Makoto Sakurai, a former Bank of Japan board member, expects rate increases about every quarter, lifting the policy rate to 2% near June next year. The BOJ moved its rate to 1.25% in September, a 31-year high, as its focus shifted toward wider price pressures linked to costlier fuel. Sakurai, who keeps close ties with current policymakers, said the bank is increasingly concerned with these broader pressures.

Sakurai cited government data showing Japan's crude oil import costs have risen roughly 70% to 80% in recent months compared with levels prior to the February attack on Iran by the United States. A weak yen and strong demand linked to artificial intelligence are also boosting manufacturers' profits, adding to demand-driven price pressures. He expects consumer inflation to exceed 3% between year-end and early next year, which could push the BOJ to accelerate its hikes.

He expects the BOJ to lift its inflation forecasts in the quarterly update due in October, with a December hike most likely and October possible if revisions are large. He sees the terminal rate near 2%, possibly higher if inflation stays around 3%. Meanwhile the yen weakened after the central bank's message was seen as insufficiently hawkish, and Sakurai argued the currency will not recover unless the fiscal stance under Prime Minister Sanae Takaichi changes.