Bank of Japan should continue raising interest rates at intervals of a few months, board member Naoki Tamura said in a speech, arguing the policy rate should gradually move toward a neutral level of around 2%, above the current 1%. He noted inflationary pressures are likely to strengthen regardless of Middle East tensions, with higher import costs expected to pass through to consumer prices more quickly and broadly than after Russia’s 2022 invasion of Ukraine, reflecting shifts in firms’ pricing behavior. “Considering the recent increase in upside risks to prices, what I envisage as a baseline path is raising the policy interest rate by 0.25 percentage points at intervals of a few months toward the neutral interest rate level of 2%,” Tamura said. He added that if inflation risks intensify, the central bank should “accelerate the pace of rate hikes without hesitation” by increasing either the frequency or size of moves.

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