Tamura flags sticky inflation and positive output gap, signalling scope for further BOJ rate hikes.
Summary:
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BOJ’s Tamura says inflation becoming “sticky”
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Price target may be judged achieved as early as spring
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Output gap already positive
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Yen weakness a renewed inflation risk
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Policy still accommodative at 0.75%
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Neutral rate likely at least around 1%
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Signals scope for further tightening
Bank of Japan board member Naoki Tamura delivered remarks that reinforce the case for further policy normalisation, warning that inflation in Japan is becoming increasingly sticky and that the central bank may soon be in a position to judge its 2% price target as sustainably achieved.
Tamura said recent inflation dynamics suggest price pressures are stabilising at elevated levels rather than fading. He noted that consumer inflation has been hovering around the 2% target and argued that the Bank may be able to determine as early as this spring that its price objective has been met. Such language marks a notable shift from the long-running focus on deflation risks.
He added that Japan’s output gap has already moved into positive territory, signalling capacity constraints and supply-side pressures that are pushing prices higher. Rising food costs are expected to persist, while renewed yen weakness poses upside risks to the inflation outlook via import prices.
Against this backdrop, Tamura emphasised that monetary conditions remain accommodative even after the policy rate was lifted to 0.75% in December 2025. He suggested that the cumulative tightening to date has had limited restraining impact on economic activity, with investment and financial conditions still broadly supportive.
Crucially, Tamura indicated that the neutral policy rate is likely at least around 1%, implying there remains considerable room for additional rate increases before policy becomes restrictive. This framing signals that further hikes would represent continued normalisation rather than an overt tightening cycle.
He stressed the need to scrutinise incoming data carefully to ensure a “smooth landing,” but the overall tone suggests the BOJ is increasingly confident that Japan has exited its deflationary phase.
Taken together, the speech reinforces expectations that the Bank of Japan will continue edging rates higher if inflation proves durable.
