BOJ's Takata urges nimble rate hikes to counter inflation pressures

TOKYO, Sept 2 : The Bank of Japan should conduct interest rate hikes nimbly in response to inflationary pressures, rather than at a fixed semiannual pace, hawkish board member Hajime Takata said on Wednesday.

Rather than semiannual rate hikes previously anticipated by markets, 2026 represents a regime change, with future hikes becoming more nimble and data-dependent, driven by domestic inflation and growth trends as well as overseas developments, Takata said in a speech to business leaders in Sapporo in northern Japan.

"I consider it necessary for the BOJ to shift from the current stance of encouraging a rise in underlying inflation and to demonstrate to the market its determination to prevent upward deviations in prices," he said.

He added that the BOJ needs to carefully monitor the risk that the divergence of monetary policy stances between Japan and other countries could bring about high volatility in Japan's financial markets, particularly foreign exchange markets.

Takata was the sole dissenter to the BOJ's decision in July to keep short-term interest rates steady at 1 per cent, calling for a rate hike to 1.25 per cent to respond to inflationary risks from external demand shocks.

Sources have told Reuters the BOJ is set to raise the rate as soon as at its two-day policy meeting through September 18, and is considering hiking more aggressively thereafter than the current pace of roughly two times a year.