Bank of Japan Former Policy Board Member: The central bank may raise rates before July, and core inflation has already reached the 2% target

Gate News message. On Tuesday, Masayoshi Anda, a former policy board review member of the Bank of Japan, said the Bank of Japan is likely to raise interest rates before July because the Middle East war has sent oil costs surging, increasing the risk that the central bank will fall behind the curve in addressing mounting inflation pressure. Anda said underlying inflation has reached the Bank of Japan’s 2% target, and last week’s Tankan survey showed firms’ five-year inflation expectations at 2.5%. He said the surge in oil prices and supply constraints caused by the Iran war provide more reason for the central bank to raise its short-term policy rate from the current 0.75% soon. Anda said, “The Bank of Japan should raise rates to a level neutral for the economy as soon as possible,” adding that Japan’s neutral rate may be around 1.25%. But he also said the likelihood of a rate hike in April is “50%,” because the Iran war keeps markets volatile and makes Japan’s vulnerable economic outlook more unclear.