Bank of Japan hawkish members call for rate hikes: Japan's persistently low prices are gradually fading.

Bank of Japan (BOJ) board member Hajime Takata stated that the time is ripe to raise the central bank's policy interest rates. He is not currently considering political turmoil as a factor and reaffirmed his position - last month, he voted against the decision to maintain policy unchanged. On Monday, Takata spoke to local business leaders in the southwestern city of Hiroshima in Japan, saying, "I believe now is the perfect time to raise policy interest rates." He pointed out, "Japan's longstanding norm of low prices has gradually faded, and the goal of price stability has been largely achieved." This is Takata's first public speech after proposing a rate hike, and he particularly emphasized the importance of addressing the issue of inflation exceeding the central bank's target for over three years. Despite the likelihood of Fumio Kishida, who supports loose monetary policy, being elected as Japan's next Prime Minister this week, Takata's comments indicate his firm support for a rate hike. Due to the increased probability of Kishida's election, traders currently believe that the probability of a rate hike by the Bank of Japan on October 30th is around 24%. According to overnight swap market pricing data, this probability has decreased significantly from about 68% at the end of last month. Takata's comments suggest that if Bank of Japan Governor Kazuo Ueda pushes to keep the policy rate unchanged at 0.5%, there may be a disagreement in the central bank's board meeting again this month. At the policy meeting on September 18th and 19th, Takata and another board member, Naoki Tamura, jointly proposed a 25 basis point rate hike, a move that surprised many observers of the Bank of Japan. Takata stated that the era of prolonged deflation in Japan has ended, and authorities need to change their policy direction. He said, "For the past three and a half years, overall inflation has remained at 2% or above. I believe action must be taken on this current situation." Additionally, this former senior economist and bond analyst pointed out that "the yen did not appreciate after the Federal Reserve cut rates earlier this year," another factor supporting a rate hike by the Bank of Japan. Currently, the yen exchange rate remains weak, hovering around the key level of 1 US dollar to 150 yen. At his last scheduled public event before the next policy decision, Ueda stated last week that the Bank of Japan's stance on rates has "completely" not changed, implying that he does not rule out the possibility of a rate hike in October. Takata stated, "Although the Federal Reserve implemented a rate cut in September 2025, the yen did not appreciate, instead it depreciated. In addition, both the Japanese and US stock markets are at historic highs, creating a positive market sentiment."