BoJ board member Seiji Adachi has signaled that the central bank could raise interest rate earlier if depreciation of Yen accelerates or persists.
In his speech today, Adachi emphasized the need to avoid premature rate increases. However, he also warned that an excessive focus on downside risks could lead to an inflation spike, necessitating sharp monetary tightening later on.
Adachi highlighted the importance to “gradually adjust” monetary support based on economic, price, and financial developments, as long as underlying inflation trends toward 2% target.
He projected that consumer inflation will re-accelerate from summer through autumn due to rising import costs and sustained wage gains. However, if Yen’s decline accelerates or persists, “consumer inflation could rebound sooner than expected”.
“If this happens at a time when there is a higher chance of inflation durably and stably exceeding 2%, we may need to push forward the timing of an interest rate hike,” Adachi noted.
