By Leika Kihara
OKAYAMA, Japan (Multibagger) - In a speech to business leaders in Okayama, Bank of Japan board member Naoki Tamura emphasized the importance of raising short-term interest rates to at least 1% to prevent inflation risks from materializing.
Tamura highlighted the need to increase interest rates gradually and at the right timing to achieve the BOJ's 2% inflation target sustainably. The current policy rate stands at 0.25% after the last hike in July.
He projected that Japan's economy is on track to reach the inflation target, signaling the necessity of raising interest rates to a neutral level by late 2025. The estimated neutral rate for Japan is around 1%.
"To achieve our price goal, it is crucial to elevate our short-term policy rate to around 1% by the latter half of the fiscal year ending March 2026," Tamura stated.
## Analysis:
Naoki Tamura, a board member of the Bank of Japan, has proposed raising short-term interest rates to combat potential inflationary risks. This move aims to ensure sustainable economic growth and achieve the BOJ's 2% inflation target. By gradually increasing interest rates to around 1% by late 2025, Japan can maintain a neutral monetary policy stance. This adjustment is crucial for the economy to thrive and meet its price stability objectives. Investing in line with these developments can help individuals navigate the changing financial landscape and protect their assets in the long run.