• FX rates movement is not just driven by policy stance of central banks, but also other factors
• FX moves are an important factor affecting Japan’s economy, prices
• Japan has already achieved 2% inflation target
• Must now raise rates near neutral to avoid underlying inflation from overshooting above target
• BOJ needs to gauge where neutral rate lies by assessing the impact of each rate hike
• If risk of inflation overshoot materialises, we may need to accelerate pace of rate hikes
• Whether that means once every 3 or 4 months would depend on how economy, markets respond to each rate hike
• Must raise interest rates more frequently or at bigger size if risks of inflation overshooting materialises
• However, don’t think that is necessary for now

The comments are not all too surprising as Tamura is one of the more hawkish members. This just continues to reaffirm the BOJ policy stance in that they are still keeping the door open to raise interest rates further.

But again, all of it will be subject to how things play out with regards to Middle East developments. That aside, the Japanese central bank will also still need to consider fiscal pressures, currency pressures, and also wage dynamics in making any decision. So, it’s not going to be quite straightforward. That especially with cost-push inflation creeping into the equation now.