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.

In a speech to business leaders, Naoki Tamura said that the central bank should raise rates to 1% or higher in the fiscal half starting in October.

The Bank of Japan is likely to keep raising its benchmark rate to a level exceeding the current market consensus, and there’s a chance two more moves could come this year on top of last month’s hike,

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.

The Bank of Japan must raise interest rates to at least 1 per cent by the second half of the fiscal year beginning in April, hawkish board member Naoki Tamura said on Thursday, remarks that pushed up the yen as they reinforced bets of a near-term rate hike.

A speech by the board member is likely to further fuel market speculation that more rate hikes are in the pipeline.

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.