Bank of Japan (BOJ) official Hajime Takata has once again struck a hawkish tone, declaring that Japan is “very close” to achieving its 2% inflation target and emphasizing that the time has come for another interest rate hike. His remarks further highlight growing divisions within the BOJ’s policy board ahead of the upcoming monetary meeting later this month.
In his speech on Monday, October 20, Takata stated that Japan’s economic recovery remains solid, despite external pressures stemming from U.S. import tariffs. He pointed to findings from the October Tankan business survey and the BOJ’s branch reports, which indicate a strengthening labor market and rising wages, both of which are supporting household spending and domestic demand.
“Companies have managed to raise prices and wages in a sustainable manner — this signals a healthy inflation cycle,” said Takata. “We are very close to the inflation target, and there’s even a risk of overshooting it.”
A Renewed Push for Policy Normalization
Takata’s comments came just one month after he was the sole board member to vote in favor of raising the policy rate from 0.5% to 0.75% during the September meeting. Although his proposal was not supported by the majority, his latest remarks suggest he will again advocate for tightening at the next BOJ policy meeting scheduled for October 29–30.
His assertive stance could accelerate Japan’s slow-moving monetary normalization process, which the BOJ has approached cautiously for more than a decade. During that time, the central bank has maintained ultra-low interest rates to combat chronic deflation and stimulate sustainable inflation.
Now, with both wages and prices rising simultaneously, several policymakers see strong momentum to end the era of zero interest rates.
Divided Views Within the BOJ
Meanwhile, BOJ Governor Kazuo Ueda continues to take a more cautious approach. He has warned of global economic uncertainties, particularly the risk of a slowdown in the United States and the potential impact of new U.S. tariff policies on Japan.
This divergence underscores a clear split between the hawkish and dovish factions within the BOJ — with Takata leading the push for faster tightening, while Ueda remains focused on maintaining market stability and supporting economic recovery.
Market Impact
Expectations of a possible rate hike by the BOJ this month have strengthened the yen against the U.S. dollar, while yields on 10-year Japanese Government Bonds (JGBs) have risen to their highest level since 2013.
Analysts note that if the BOJ does move to raise rates before year-end, it could trigger capital inflows back into Japan, weigh on the U.S. dollar, and narrow global yield differentials, which have long been a key factor behind the yen’s weakness.
Ade Yunus, ST, WPA
Global Market Strategist