Bank of Japan Signals Potential Rate Hikes as Inflation Nears Target

Central bank officials emphasize rising wages and underlying inflation trends in assessing future monetary policy adjustments.

The Bank of Japan (BOJ) will consider further interest rate hikes if underlying inflation continues to approach its 2% target, according to senior officials.
Japan’s core consumer inflation reached 3% in December, but the BOJ focuses on underlying inflation driven by domestic demand, which remains below the target.
The central bank raised its short-term interest rate to 0.5% in January, citing progress toward sustainable inflation and wage growth.
Recent data shows a 2.7% annual increase in base wages in December, with real wages rising 0.6% after adjusting for inflation.
Experts, including a former BOJ official, suggest additional rate hikes could bring the benchmark rate to as high as 1.5% by the end of the year.