TOKYO : The Bank of Japan may raise interest rates if sharp falls in the yen boost inflation or the public’s perception of future prices move more than expected, board member Seiji Adachi said on Wednesday.
While short-term currency moves alone would not trigger a policy shift, the central bank could raise interest rates if excessive yen falls persist and have a big impact on inflation expectations, Adachi said in a speech.
He also said the BOJ must look not just at downside risks to the economy and prices, but upside risks, in guiding policy.
“We must by all means avoid raising interest rates prematurely. But by focusing too much on downside risks, we could see inflation accelerate in a way that forces us to tighten monetary policy sharply later on,” Adachi said.
“As long as underlying inflation continues to head toward 2 per cent, it’s important to gradually adjust the degree of monetary support reflecting economic, price and financial developments,” he said, signalling the chance of a near-term rate hike.
