BOJ board member Junko Koeda urges bank not to be overly cautious on rate rises, citing rising inflation risks

Junko Koeda, a member of the Bank of Japan’s policy board, told business leaders in Kumamoto that the central bank should not be overly cautious about further interest-rate increases. Koeda said on Oct 15 that upside risks to inflation are considerable and argued the BOJ needs to judge rate moves “in a timely manner” while keeping the estimated neutral interest rate in mind.

Her remarks came after the BOJ raised its key rate to a 31-year high last month. Koeda said Japan’s financial conditions remain accommodative despite the recent tightening and that she sees little sign that higher borrowing costs are hurting household or business activity.

She pointed to steady wage gains and continued price increases across a wide range of consumer items as evidence that underlying inflation is becoming anchored around the BOJ’s 2 per cent target. In the speech delivered to local business leaders in southern Japan, Koeda framed those wage and price trends as indicating more durable progress toward sustained inflation.

She urged the BOJ to adjust policy with attention to current economic and price developments rather than erring on the side of excessive caution. The article notes the BOJ’s recent rate move to a 31-year high and reports that Reuters sources told markets the bank may pause in October but could drop hawkish hints to reinforce expectations of a further hike in December.

Koeda’s comments therefore signal that at least one policymaker on the board favors keeping the door open to additional tightening if inflationary pressures persist. Koeda also emphasised the need to consider the BOJ’s estimate of the neutral interest rate when timing adjustments, implying a measured approach that nonetheless would avoid needless delay.

She did not provide quantitative projections for future rate steps or set an explicit timeline for policy moves beyond endorsing timely adjustments. Her speech focused on domestic economic indicators as the basis for policy judgement: accommodative financial conditions, steady wage rises and broad-based price increases.

Those elements, she said, support vigilance against upside inflation risks rather than premature precaution that could leave inflation overshooting or embed higher inflation expectations.