Japan

BOJ's Masu Signals More Rate Hikes as Monetary Policy Meeting Looms

Should Japan keep hiking to escape negative real rates or would more tightening trigger a bond-market reckoning?

Published SEP 10

BOJ's Masu Signals More Rate Hikes as Monetary Policy Meeting Looms

Story

Above: The Bank of Japan headquarters in Tokyo on Sept. 1. Image credit: Yuichi Yamazaki/AFP/Getty Images

The Facts

Bank of Japan (BOJ) board member Kazuyuki Masu said in a speech on Thursday that the central bank will continue raising its policy rate, adding that the "most vital" task is ensuring that underlying inflation "does not significantly exceed" 2%.
Bank of Japan
Bloomberg
Yonhap News Agency
Masu insisted that further increases are needed to "complete the normalization of monetary policy" so that the rate — currently at 1% — sits within the estimated neutral range, which the bank puts at 1.1% to 2.5%.
Bank of Japan
Tradingeconomics
Japan's economy, Masu added, had now "fully transitioned" from deflation to inflation, with risks rising from renewed price pressures caused by food prices, distribution costs, yen depreciation and AI-driven demand.
Bank of Japan
If inflation — which Masu noted had recently declined due to temporary factors, from 4% in January 2025 to 1.9% in July 2026 — accelerates, Masu warned that the BOJ may be forced to impose "rapid" rate increases.
Bank of Japan
Tradingeconomics
His comments come just over a week before the BOJ's Policy Board meets on Sept. 17 and 18 to decide its bank rate, with swap contracts implying a roughly 97% chance the central bank will implement a hike.
Bank of Japan
The Japan Times
A Reuters poll of 68 economists, meanwhile, found that 97% expect a quarter-point rise to 1.25% on Sept. 18, up from 57% in the previous survey. About 62% predict the rate will then rise to 1.75% or higher by the end of the second quarter of 2027.
Reuters

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The Spin

Narrative A

Japan's negative real interest rates have overstayed their welcome, inflating real estate values, pushing firms into hasty investment and quietly eroding household savings. With underlying inflation near 2% and financial conditions still loose, the 1% policy rate remains below any credible estimate of the neutral range. Japan must keep hiking, or risk a panicked scramble later.

Bank of Japan

Narrative B

Tokyo's political class is only blessing a hike because stagflation has crushed approval ratings, not because it has any stomach for sustained tightening. Cheap money and a weak yen have been Japan's substitute for deeper reforms for three decades, and little has changed. With 10-year yields already at a 30-year high, Takaichi's borrowing plans risk a bond-market reckoning.