A Bank of Japan board member has emphasized that further increases in the benchmark interest rate are necessary to complete the process of monetary policy normalization. This statement is likely to reinforce market expectations for an earlier rate hike by the central bank. Masu Kazuyuki, a member of the BOJ's policy board, stated during a speech to business leaders in Ehime Prefecture, western Japan, on Friday, "I believe that Japan must continue to raise the policy interest rate to achieve monetary policy normalization." Kazuyuki noted that raising interest rates would help end the divergence between Japan's monetary policy and that of other countries. Although he did not elaborate further, the interest rate differential between Japan and other major economies has been widely viewed as a key factor behind the yen's persistent weakness. The depreciation of the yen has increased import costs, negatively impacting Japanese businesses and household finances.

This remark represents another signal of potential rate hikes following the hawkish shift indicated during the Bank of Japan's January monetary policy meeting. It has further heightened market expectations for a rate hike before April. After the BOJ's rate increase in December, most economists initially predicted that the next hike would not occur until June or July at the earliest. Kazuyuki stated, "The key now is to stabilize core inflation below 2% through timely and moderate increases in the policy rate." He also pointed out that the rate hikes should not be too aggressive, to avoid disrupting the gradual upward trend in wages and inflation.

This was Kazuyuki's first public speech since joining the BOJ's nine-member policy board in July of last year. At that time, he described his policy stance as being between hawkish and dovish, which contrasts with the hawkish signals conveyed in this recent speech. Following his remarks, the yen showed little movement, with the USD/JPY exchange rate remaining near 156.70. Given the continued weakness of the yen, the Bank of Japan has recently expressed concerns that exchange rate movements could hinder efforts to control inflation.

Kazuyuki, who previously worked at Mitsubishi Corporation, a major Japanese trading company, stated in his speech that current price trends in Japan are "very close" to the central bank's 2% inflation target. He added that, as food inflation pressures are expected to gradually ease, core inflation data will become a key basis for the BOJ's monetary policy decisions. The latest data released on Friday showed that the proportion of Japanese household spending on food reached a record high in 2025, significantly reducing households' capacity for non-essential consumption.

According to pricing in the overnight index swap market, traders currently estimate the probability of a Bank of Japan rate hike before April at approximately 74%. The central bank's next monetary policy decision is scheduled to be announced on March 19.