KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
Naoki Tamura, a hawkish member of the Bank of Japan (BOJ), stated on Thursday that the central bank must raise interest rates to at least 1% by late next year, reinforcing the BOJ's commitment to steady monetary tightening.
This marks the first time a BOJ policymaker has publicly specified a target level for short-term borrowing costs. Tamura argued that the likelihood of Japan's economy achieving the BOJ's 2% inflation target on a sustainable basis is improving, which necessitates raising interest rates to levels considered neutral by around late 2025.
Tamura explained that Japan's neutral interest rate—the rate that neither stimulates nor cools the economy—is estimated to be at least around 1%. "As such, it’s necessary to push up our short-term policy rate to at least around 1% by the latter half of the fiscal year ending March 2026 to sustainably achieve the BOJ’s price goal," he said during a speech to business leaders in Okayama, western Japan.
His remarks follow a series of comments from other BOJ board members advocating for continued increases in borrowing costs, despite recent volatility in financial markets. While the BOJ is expected to leave rates unchanged at its next meeting on September 20, more than half of the economists polled by Reuters last month predict further tightening before the end of the year.
In a historic move, the BOJ abandoned negative interest rates in March and increased short-term rates to 0.25% in July, reflecting progress toward achieving its 2% inflation target sustainably. Governor Kazuo Ueda has indicated the bank's readiness to raise rates further if inflation remains around 2% in the coming years, accompanied by solid wage growth.
While advocating for higher rates, Tamura emphasized the need for the BOJ to carefully assess how rising borrowing costs impact the economy, given Japan's long-standing experience with near-zero interest rates. However, he also warned that market expectations for the pace of BOJ rate hikes might be too slow to prevent inflation from overshooting.
"We must raise interest rates at an appropriate timing and in several stages," said Tamura, who is viewed by markets as one of the most hawkish members of the BOJ's nine-member board. He also expressed concern that the risk of upside inflation is increasing, with intensifying labor shortages prompting firms to raise wages and pass on rising costs through price increases.
Core consumer inflation in Japan hit 2.7% in July and has remained at or above the 2% target for 28 consecutive months. The neutral interest rate is a crucial metric for central banks in setting monetary policy, although it cannot be observed directly and must be estimated using economic models.
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