TOKYO :Bank of Japan board member Hajime Takata said on Monday the economy is weathering the hit from U.S. tariffs and has likely already met its 2 per cent inflation target, reiterating his call for resuming interest rate hikes.
The BOJ’s “tankan” business survey in October and findings from the bank’s branch managers suggest improvements in job and income conditions are underpinning consumption, Takata said in a speech.
With companies steadily raising prices and wages, Japan has already roughly achieved the BOJ’s 2 per cent inflation target and now risks prices overshooting expectations, he said.
“I believe that now is a prime opportunity to raise interest rates,” he said, explaining his call for a rate hike at the September meeting.
Takata was among two members of the board who voted against keeping interest rates steady at 0.5 per cent in September, instead proposing unsuccessfully a hike to 0.75 per cent.
His remarks heighten the chance Takata will propose a rate hike again at the next meeting on October 29-30.
They also highlight a contrast between hawks in the nine-member board and Governor Kazuo Ueda, who stressed the need for caution on uncertainty over the U.S. economic outlook and the degree of damage U.S. tariffs could exert on Japan’s economy.
Takata said the U.S. economy was unlikely to suffer a major downturn due to stable financial conditions, and sound household balance sheets, firms and financial institutions.
The U.S. Federal Reserve’s interest rate cut in September did not cause an unwelcome yen rise, while U.S. tariffs have not hurt Japanese companies’ appetite to spend on equipment and wages, Takata added.
“My view is that the Bank is still in the process of gradually shifting gears” away from ultra-loose monetary policy towards interest rate hikes, Takata said.
