Senior ruling party lawmaker Taro Kono said Tuesday that Japan must raise interest rates and restore fiscal order to reverse the yen's weakness, as the currency's decline has pushed up inflation and pressured household finances.

The Bank of Japan (BOJ) ended its decade-long massive stimulus program last year and raised short-term interest rates to 0.5% in January, based on its assessment that Japan is approaching stable achievement of its 2% inflation target.

Kono, a former foreign minister who is considered a potential future prime minister, pointed out that having real borrowing costs remain negative after inflation adjustment for an extended period is not ideal. When asked about when the central bank should resume rate hikes, he responded in an interview: "I believe the sooner, the better."

He emphasized that "it is crucial to signal to the market that Japan will move away from negative real interest rates" and clearly stated that the BOJ needs to continue gradual rate increases.

Regarding market expectations that the BOJ will raise rates again before year-end, Kono said: "I won't comment on specific measures, but I feel (rate hikes) are already coming too late."

Although consumer inflation has remained above 2% for more than three consecutive years, BOJ Governor Kazuo Ueda has emphasized the need for caution in further rate hikes due to potential economic shocks from U.S. tariffs.

Critics argue that the BOJ's slow pace of rate increases has led to yen weakness, which in turn has pushed up import costs. Kono noted that yen weakness was once viewed as beneficial to Japan's export-oriented economy, but has now become a source of high inflation, eroding both corporate profits and burdening retirees.

He stated that the Japanese government and central bank must reach a new economic framework to replace "Abenomics" - the policy mix launched by former Prime Minister Shinzo Abe in 2013, centered on massive monetary and fiscal stimulus aimed at ending deflation.

"The BOJ should gradually raise interest rates while the government needs to restore fiscal health under a new consensus replacing 'Abenomics,'" Kono said. "The best measure to address rising cost of living is to reverse yen weakness and promote moderate yen appreciation."

Kono lost in the ruling Liberal Democratic Party's leadership election last year, with current Prime Minister Shigeru Ishiba emerging victorious. Following the LDP's crushing defeat in last month's House of Representatives election, calls within the party for Ishiba to step down and hold a new leadership election have been growing.

When asked whether he would run if the LDP holds another leadership election, Kono declined to comment.