Masu’s comments reinforce a more hawkish tilt at the BoJ, keeping April hike expectations alive as yen weakness sharpens inflation risks.

Summary:

• BoJ board member Kazuyuki Masu called for timely rate hikes to prevent underlying inflation from overshooting the 2% target.

• Masu said underlying inflation is still below target but “drawing very close”, with deflationary behaviour fading.

• He highlighted the weak yen as a key inflation risk, warning of spillovers into expectations and prices.

• The comments underscore growing hawkishness within the BoJ board, following dissent and recent votes for higher rates.

• Markets continue to price a meaningful chance of an April hike, keeping yen and JGB sensitivity elevated.

A Bank of Japan policymaker struck a notably hawkish tone on Friday, calling for further interest rate increases to prevent inflation from overshooting target and reinforcing market expectations for a near-term policy move.

BoJ board member Kazuyuki Masu said Japan’s underlying inflation remains below the central bank’s 2% target but is “drawing very close” as firms and households move away from deeply entrenched deflationary behaviour. Speaking to business leaders in western Japan, Masu argued that additional rate hikes will be required to complete the normalisation of monetary policy after decades of ultra-easy settings.

The remarks highlight a shift within the BoJ toward greater vigilance on inflation risks, driven by sustained wage growth, persistently high food prices and a weak yen. Masu warned that currency depreciation could amplify import costs and feed into inflation expectations, a channel policymakers are watching closely as the yen remains under pressure.

Masu said particular attention should be paid to processed food prices, noting that sharp rises in rice prices may have made households more accepting of broader food price increases. That dynamic, he suggested, could play a decisive role in determining whether underlying inflation stays contained or drifts higher.

The BoJ raised its short-term policy rate to 0.75% in December. At its January ‘on hold’ meeting one member voted for a further hike, to 1%. Masu’s comments add to evidence of a growing hawkish bloc within the nine-member board.

At the same time, Masu stressed the need for caution. While Japan has clearly entered an inflationary phase, he said excessive tightening risks undermining the nascent virtuous cycle between wages and prices. That balancing act remains central to the BoJ’s strategy.

Governor Kazuo Ueda has echoed the need for care, arguing that underlying inflation driven by domestic demand and wages has not yet firmly reached 2%. Markets, however, are increasingly focused on the risk that yen weakness accelerates import-driven inflation, with pricing reflecting roughly a 60% chance of another rate hike as early as April.