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      Bank of Japan Official Advocates for Rate Hikes Amid Inflation Concerns

      Junko Koeda, a member of the Bank of Japan's (BOJ) policy board, emphasized the need for the central bank to avoid excessive caution in raising interest rates. Speaking to local leaders in Kumamoto, Japan, she highlighted significant upside risks to prices and noted that financial conditions remain accommodative. Koeda indicated that the neutral interest rate, which neither stimulates nor restrains the economy, is likely considerably above the current policy rate of 1.25%.

      Koeda's remarks suggest that the BOJ should be prepared for further rate increases, as the neutral rate could be estimated above 2%. She pointed out that underlying inflation appears to be stabilizing around the BOJ's target of 2%, with over 70% of consumer price index items experiencing year-on-year price increases. This trend, coupled with steady wage growth, indicates that sustained inflation is becoming more entrenched in the economy.

      The BOJ board member also flagged several factors contributing to inflationary pressures, including geopolitical tensions that have driven up oil prices and a weaker yen, which has lost some of its safe-haven status. Despite these challenges, Koeda described Japan's economy as solid, citing strong corporate profits and favorable funding conditions for businesses. She reiterated the importance of normalizing the BOJ's balance sheet, which includes a gradual reduction in government bond purchases.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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