The Bank of Japan's strongest hawkish voice: Advocating for raising interest rates by 25 basis points every few months until reaching the neutral target of 2%.

One of the most hawkish members of the Bank of Japan's policy board, Naoki Tamura, said that the Bank of Japan needs to raise interest rates every few months and should accelerate the pace when facing stronger inflation risks. "My envisioned benchmark path is to raise rates every few months by a quarter of a percentage point (25 basis points) towards the neutral rate level of 2%," Tamura said in a speech on Thursday at a meeting with local businesses in Hyogo Prefecture, Japan. Tamura is a well-known hawkish figure in the Bank's Policy Board, often calling for rates to be raised to more normal levels. While his comments suggest the possibility of another rate hike earlier than expected by most Bank of Japan observers, they also indicate that he is unlikely to raise rates again in July after the hike last week, unless there is an imminent danger of inflationary pressures. "If the risk of inflation rising becomes a real possibility, I believe it is necessary to accelerate the pace of rate hikes by increasing the frequency or magnitude of the rate hikes without hesitation," Tamura said. He pointed out that factors such as conflicts in the Middle East pose risks of pushing up inflation. Tamura, a former executive at SMBC Group, has often been a dissenting voice calling for faster rate hikes. At the Bank of Japan's meeting in April, Tamura, along with Hajime Takata and Junko Nakagawa, voted in favor of raising rates, adding a hawkish tone to the decision to maintain the status quo. At last Tuesday's meeting, Tamura and his colleagues voted together to raise the policy rate to 1%, the highest level since 1995. The summary of opinions from that meeting released earlier this week showed that some officials believe it is necessary to raise rates again in the coming months. Bank of Japan Governor Haruhiko Kuroda reiterated the Bank's position to continue raising rates based on economic and inflation conditions on Wednesday, but did not provide any clear hints on when the next action may come. According to a survey conducted after last week's Bank of Japan meeting, slightly more than half of economists expect a rate hike in December, while 36% believe it will happen in October. Tamura said that the central bank needs to raise rates to around 2%, which he estimates as the neutral level. The Bank of Japan's estimate for the neutral rate (a rate that neither stimulates nor restricts economic activity) is between 1.1% and 2.5%. Prime Minister Sanae Takaichi is seen as a barrier to raising borrowing costs as she is known for supporting monetary stimulus policies. She and her government have repeatedly stated that they expect the Bank of Japan to consider government policies when making decisions. "In my view, the role of the bank is to play the role of a 'guardian of price stability' while maintaining full communication with the government," Tamura said.