Weak yen, oil costs and food prices in focus as BOJ's Masu talks hikes

Bank of Japan (BOJ) board member Kazuyuki Masu signaled that the central bank is poised to continue raising interest rates ahead of its upcoming monetary policy meeting on September 17 to 18. Masu highlighted that underlying inflation is rapidly approaching the BOJ's 2% target, driven by elevated energy and food costs, rising distribution expenses, and a weaker Japanese yen, which currently exerts a stronger inflationary pass-through than observed historically. Masu noted that a recent 7% spike in producer prices warrants close attention and cautioned that ongoing geopolitical tensions in the Middle East could foster lasting price pressures rather than temporary shocks. Stating that Japan is no longer in deflation, Masu emphasized the necessity of moving real interest rates out of negative territory as soon as possible and warned that the central bank could accelerate rate hikes if inflation overshoots baseline expectations. These hawkish remarks further cement market expectations for continued policy normalization by the Bank of Japan, providing marginal support to the Japanese yen against major currency pairs.