Bank of Japan may need to raise rates quickly if inflation rises, board member Masu says

The Bank of Japan may need to raise interest rates quickly if inflation increases, according to board member Kazuyuki Masu. During a recent address, Masu warned that Japan's financial conditions remain accommodative, and the country's authorities might need to act swiftly to curb rising prices. A recent surge in producer prices could lead to further hikes in consumer inflation, especially as companies transfer costs from geopolitical events like the Middle East conflict and the weak yen.

Masu highlighted that higher fuel and chemical prices resulting from the Iran war could increase transportation costs. Combined with rising food prices, these factors could have a lasting impact on overall prices. Masu stated that while underlying inflation has not yet reached the Bank of Japan's 2% target, it is fairly close. Japanese producer inflation has risen sharply this year due to surging oil prices, increasing business costs.

Although government subsidies have shielded consumer inflation from higher fuel prices, Japanese businesses are still expected to pass on the increased costs to consumers.