BoJ’s Masu said further rate hikes are needed to complete policy normalization.

Last Updated on 06/02/2026

BoJ board member Kazuyuki Masu said Japan has entered an inflation phase as policy normalization moves forward.

Japan has shifted into an inflationary phase.

• Must remain vigilant as yen weakness–driven inflation lifts overall and underlying prices.
• BOJ is closely watching FX moves and their impact on the economy and prices.
• BOJ is expected to keep raising rates if economic and price forecasts are realized.
• Underlying inflation is still below 2% but is approaching that level.
• Deflationary practices are being eliminated as Japan enters an inflationary phase.
• Rates must be raised in a timely and appropriate manner to prevent underlying inflation from exceeding 2%.
• Policy must remain cautious to avoid excessive hikes that could derail the nascent cycle of rising inflation and wages.
• BOJ will closely assess market conditions and the future pace of bond purchases.
• Particular attention is on processed food prices excluding rice as a key inflation indicator.
• Inflation dynamics must be assessed to determine whether they are driven by supply alone or both supply and demand.
• Japan’s real interest rate remains deeply negative.
• The neutral rate is only one reference point for policy decisions.
• As policy rates approach neutral, BOJ must more carefully examine prices, employment, and financial markets.
• Further rate hikes are needed to complete policy normalization.

Market reaction

At the time of writing, USD/JPY is trading 0.28% lower on the day at 156.60.

Sources: Lallalit Srijandorn