Japan must raise rates, central banker says - Financial Times

Japan's central banking leadership has signalled that interest rates must rise, according to remarks reported by the Financial Times. The comment matters because Japan has spent years as the outlier among major economies, holding borrowing costs near zero or below while the US and Europe tightened policy. That stance kept the yen under pressure and made Japanese assets a popular funding source for global investors.

The case for higher rates rests on domestic conditions. With inflation in Japan running above the central bank's target for an extended period and wage growth firming, officials appear more comfortable that price pressures are becoming durable rather than transient. A rate increase would mark another step away from the ultra-loose framework that defined the past decade.

For markets, the key question is pace. Even gradual tightening can influence the yen, Japanese government bond yields, and carry trades that borrow in yen to fund purchases elsewhere. Investors will watch upcoming policy meetings, wage negotiations, and inflation data for confirmation of how quickly the shift unfolds.