Hajime Takata advocates for interest rate increase as Japan's pricing standards shift

Hajime Takata, a member of the Bank of Japan’s board known for taking a more aggressive approach, urged that now is the ideal time to increase the bank’s policy interest rate. This marks a shift in stance after he opposed September’s decision to maintain the policy unchanged despite ongoing political instability.

While administering a speech to local business executives in Hiroshima, southwestern Japan, Takata stated that now is an excellent chance to raise the policy interest rate.

Based on his explanation, the country’s old norm about keeping prices stable has weakened. Additionally, the BOJ is close to achieving its price stability target.

Takata’s shift in stance surprises several observers of the Bank of Japan

During his first speech, after shifting his stance towards supporting a rate hike, Takata called on the need to address inflation levels that have surpassed the BOJ’s target for over three years. 

This statement shows Takata’s strong support for raising interest rates even as there is an increased likelihood that Sanae Takaichi, a supporter of more relaxed monetary policies, will become Japan’s next prime minister this week, said sources familiar with the situation.

Meanwhile, as Takaichi’s odds increase, traders have weighed in about a 24% chance of a rate hike following the bank’s upcoming policy announcement on October 30. According to data from the overnight swaps market, this percentage dropped from roughly 68% at the end of last month. 

Takata’s remarks have also raised concerns among analysts, as they believe that this shows the likelihood of another split vote during the board meeting set to take place this month. However, this will only happen if Governor Kazuo Ueda advocates maintaining the policy rate steady at 0.5%. 

Notably, this is not the first time Takata has surprised observers of the Bank of Japan. In a meeting on September 18 to 19 this year, he and Naoki Tamura, another board member, requested a 25 basis point increase in the policy rate.

Takata firmly believes that the BOJ will increase interest rates this month 

With Japan’s long period of steady deflation drawing to a close, Takata believes it is time for authorities to rethink their stance. “I think it is crucial to focus on the level of headline inflation, which has stayed at 2% or higher for the last three and a half years,” he said.

Despite these efforts, Governor Ueda hinted last week that he is not ruling out an October rate hike in his last public appearance before the upcoming policy decision. He said the bank’s stance on rates has not changed “at all.”

Even with this, Takata still believes that the BOJ will increase the interest rates. He pointed out the yen’s failure to strengthen after the Federal Reserve lowered borrowing costs earlier this year as the reason behind his argument.

Moreover, reliable sources have highlighted that the yen is still modestly weak, trading at around a significant level of about 150 per dollar. “The value of yen did not rise–rather it decreased–even though the Federal Reserve reduced the policy interest rate in September 2025,” Takata elaborated.

He also noted that stock prices in both Japan and the US have reached record highs in history, further enhancing market optimism.

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