BOJ's Takata says rate increases should become nimble as inflation risks rise

Bank of Japan board member Takata Hajime said Wednesday that rate increases should become more nimble as the risk to prices shifts upward.

The Bank raised its policy rate to around 1.0 percent in June. Takata proposed 1.25 percent at the July meeting, but the other eight board members rejected it.

His new speech goes further. Takata called 2026 a third phase of policy normalization in which increases should not follow a fixed pace. He said medium and long-term inflation expectations have risen to around 2 percent, while Japan's inflation-adjusted policy rate remains the lowest in the world.

Takata said the policy rate has not reached the neutral range and that the neutral rate may exceed market expectations. He pointed to AI investment, changing business practices and higher potential growth as forces that could lift it. The view is his own, not a new decision by the board.