BOJ should not be overly cautious in raising rates, board member Koeda says

Bank of Japan board member Junko Koeda recently stated that the central bank should not be overly cautious about raising interest rates, as there are potential upside risks to inflation. Koeda emphasized that Japan's financial conditions have remained accommodative even after past interest rate hikes, with no signs of higher borrowing costs negatively impacting households and businesses.

The presence of rising prices across various consumer goods indicates that underlying inflation is stabilizing around the Bank of Japan's 2% target, she added. Steady wage increases further suggest that Japan is making more sustainable progress towards achieving sustained inflation, Koeda explained in a speech to business leaders in Kumamoto, southern Japan.

The BOJ recently raised its key rate to a 31-year high and signaled a shift towards preventing underlying inflation from exceeding its target, which has increased the likelihood of additional policy tightening. While a pause may occur in October, it is expected that the BOJ will issue hawkish signals potentially leading to a December rate hike, according to sources speaking to Reuters.