A senior executive at Mizuho Financial Group has suggested the Bank of Japan may raise its benchmark interest rate as early as March, with the potential for up to three rate hikes throughout the year. Kenya Koshimizu, head of global markets business at the group, stated in an interview that persistent inflation and a weak yen could prompt the central bank to act sooner than many anticipate.

Koshimizu indicated that due to the yen's weakness and inflation remaining above the central bank's target, as many as three rate increases are expected this year, with the next hike quite possible in March or April. He noted several positive factors in the market, including nominal economic growth of 3% to 4% and a clearer policy strategy from the government. The Bank of Japan is expected to adjust monetary policy in response to these economic improvements, he added.

In December, the Bank of Japan raised its policy rate to 0.75%, the highest level in 30 years, signaling readiness for further tightening. While a recent Reuters poll showed most economists expect the central bank to wait until July to assess the impact of the previous hike, Koshimizu's forecast is more aggressive.

Regarding the recent sell-off in government bonds, Koshimizu described current bond yields as reasonable. He stated that in an era of 3% to 4% nominal growth, a 10-year yield in the 2% range is not surprising, and even a further rise would not be unreasonable.

The benchmark 10-year Japanese government bond yield hit a 27-year high of 2.38% in late January amid concerns about the country's fiscal health, before retreating to around 2.2%. Koshimizu commented that based on actions such as budget drafts, the government appears to be considering fiscal discipline, and Japan's fiscal balance is improving rapidly from a flow perspective.