BOJ’s Tamura Flags Rising Inflation Risks as Bank Lifts 2025 CPI Forecast

Bank of Japan policy board member Seiji Tamura said the central bank must stay ready to raise interest rates "in a timely, appropriate fashion" as upward price pressures intensify. Speaking on 25 June, Tamura cautioned that medium- and long-term inflation expectations are "gradually heightening" and could overshoot if the BOJ delays action. Should upside risks build further, the board may have to act "decisively" even amid uncertainty, he added. Tamura outlined a preference for lifting rates in stages, with a cumulative increase of about 1 percentage point in mind if the likelihood of durably hitting the 2 percent inflation target increases. While he does not yet see the need for an immediate move, Tamura said the BOJ should not rule out hikes large enough to keep the bank from falling behind the curve. His remarks were followed on 31 July by the BOJ’s quarterly outlook, which raised the median forecast for core consumer-price inflation in fiscal 2025 to 2.7 percent from April’s 2.2 percent projection. The central bank also nudged its fiscal-2025 real-GDP growth view to 0.6 percent from 0.5 percent and said underlying inflation is likely to stall temporarily before accelerating to a level broadly consistent with the 2 percent goal between fiscal 2025 and 2027. The report noted that medium- and long-term inflation expectations are "moderately rising" and could strengthen after a period of stagnation. The combination of Tamura’s hawkish tone and higher inflation forecasts strengthens expectations that the BOJ, which ended negative rates earlier this year, is preparing for a further withdrawal of monetary stimulus if price momentum proves persistent.