Kazuo Ueda, governor of the Bank of Japan (BOJ), hinted at the possibility of raising the short-term policy rate, the benchmark interest rate, at the next monetary policy meeting scheduled for mid-month.
Ueda said at a lecture hosted by Kyodo News on the 3rd that "even amid uncertainty in the Middle East, there is a clear need to discuss the appropriateness of raising interest rates."
This is being interpreted to mean that at the monetary policy meeting to be held on the 15th–16th, an interest rate increase from the current "around 0.75%" could be carried out.
He said, "Given the impact of high oil prices, we cannot ignore the risk that the inflation rate will exceed expectations."
Ueda also noted at a news conference after attending the Group of Seven (G7) finance ministers and Central Bank governors' meeting in Paris, France, on the 19th (local time) last month that the impact of instability in the Middle East on Japan's economy and prices is gradually emerging.
If the Bank of Japan raises rates at the next monetary policy meeting, the level is expected to be 1.0%, up 0.25 percentage point from the current around 0.75%.
Ueda also said that if rate hikes are delayed, "there is a concern it could place a heavy burden not only on the economy but also on markets and the financial system."
Other policy board members at the Bank of Japan are also raising the need for rate hikes amid a weaker yen and high inflation. Policy Board member Junko Koeda, who voted in favor at the last decision to keep the benchmark rate unchanged, said in a lecture on the 21st of last month that "it is necessary to continue raising the policy rate to adjust the degree of monetary easing."
On the Tokyo foreign exchange market that day, the yen weakened and at one point reached 160 per dollar. This is the level before the Bank of Japan and the government's exchange-rate intervention.