The Bank of Japan must raise short-term interest rates to at least 1% by the second half of fiscal 2025 to contain inflation risks, board member Naoki Tamura said on Thursday. Tamura, a former commercial banker known as among the most hawkish members of the board,

The return of inflation and wage growth is giving the Bank of Japan room to raise interest rates and declare the end of a long period of stagnation.

The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis, underscoring its confidence that rising wages will keep inflation stable around its 2% target.

Japan's central bank has increased the cost of borrowing to its highest level in 17 years, after consumer price rises accelerated last year. The move by the Bank of Japan (BOJ) to raise its short-term policy rate to 0.5% comes just hours after the latest economic data showed prices rose last month at the fastest pace in 16 months.

Bank of Japan policy board member Naoki Tamura said, “Raising short-term interest rates to at least around 1% in the latter half of fiscal 2025 is necessary to reduce upside risk to prices and achieve the price stability target in a sustainable and stable manner.

The Bank of Japan will continue to raise interest rates if underlying inflation accelerates toward its 2% target as projected, a senior central bank official said on Wednesday. "Underlying inflation is heading toward 2% but still remains below that level now.