Key facts
- A Japanese government panel member, Toshihiro Nagahama, advocated for moderate Bank of Japan interest rate hikes.
- Nagahama believes these hikes are necessary to correct the yen's excessive weakness.
- He estimated Japan's nominal neutral rate to be around 1.5%.
- Nagahama proposed two additional rate increases, spaced six months apart.
- Hawkish Bank of Japan board member Naoki Tamura suggested raising rates every few months towards a 2% neutral level.
TOKYO, July 2 (Reuters) - Toshihiro Nagahama, a member of a Japanese government panel and an economic aide to Prime Minister Sanae Takaichi, stated on Thursday that the Bank of Japan should continue to raise interest rates at a moderate pace to rectify excessive yen declines.
Nagahama indicated that he views Japan's nominal neutral rate, the level at which growth is neither cooled nor overheated, as being around 1.5%. He advised the central bank to implement two more policy rate increases, each occurring every six months, to reach this level.
"Moderate BOJ rate hikes are important in rectifying excessive yen weakness," Nagahama told a news conference.
Separately, Bank of Japan board member Naoki Tamura, known for his hawkish stance, has called for interest rates to be raised every few months. Tamura suggested a baseline path of increasing the interest rate by a quarter percentage point at intervals of a few months toward a neutral interest rate level of 2%. His remarks suggest a potential for earlier rate hikes than many BOJ watchers anticipate, though he indicated that another hike in July might not occur if there is no immediate danger of upside inflation momentum following the previous week's increase.