# Former Bank of Japan governor Kuroda backs more rate increases as services inflation reaches 3.7%

Japan's services producer prices rose 3.7% from a year earlier in September, led by international cargo costs that nearly doubled because of the Middle East conflict.

- Published: 2026-10-27T05:06:34.199Z
- Canonical: https://polylog.news/2026-10-27/former-bank-of-japan-governor-kuroda-backs-more-rate-increas
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Investing.com Economy](https://www.investing.com/news/economy-news/exboj-chief-kuroda-backs-more-rate-hikes-his-former-deputy-urges-caution-4974114), [Bank of Japan](http://www.boj.or.jp/en/statistics/pi/cspi_release/sppi2609.pdf)

Haruhiko Kuroda, who ran the Bank of Japan's (BOJ) decade of large-scale monetary easing, now [supports further rate increases](https://www.investing.com/news/economy-news/exboj-chief-kuroda-backs-more-rate-hikes-his-former-deputy-urges-caution-4974114) by his successor, Kazuo Ueda. In a newly published book, Kuroda writes that he is sure the BOJ will consider a 25-basis-point increase at each policy meeting to bring rates closer to levels considered neutral for the economy. One of his former deputies urged caution.

The data support the case for further increases. The BOJ's [services producer price index for September](http://www.boj.or.jp/en/statistics/pi/cspi_release/sppi2609.pdf) rose 3.7% from a year earlier, up 0.2 percentage points from August. [Nikkei reports](https://www.nikkei.com/article/DGXZQOUB262OV0W6A021C2000000/) that transportation and postal services rose 8.4%, and that international cargo transport prices rose 97.7% because of the Middle East situation. Leasing and rental prices rose 11.7%. Prices in general services rose 2.8%, and staffing and building services passed through higher labor costs.

The central bank is expected to wait for now. A [CNBC survey](https://www.cnbc.com/2026/10/27/boj-october-meeting-rate-cnbc-survey.html) finds that all respondents expect the BOJ to hold its policy rate at 1.25% when its meeting ends on Friday, October 30, and to prepare for an increase in December or January. Most respondents expect the yen to trade between 157 and 158 per dollar over the following month.

The gap between the policy rate and price growth is wide. A 1.25% policy rate set against 3.7% services price inflation leaves Japanese real rates deeply negative. That gap helps explain the weak yen and the continued use of the yen to fund carry trades into higher-yielding assets abroad (borrowing in yen to invest elsewhere).

## What this means

Japanese yields are among the main sources of global funding through the carry trade, so BOJ tightening affects markets well beyond Japan. A faster pace of increases would narrow the gap with US rates, strengthen the yen and force investors who borrowed in yen to sell foreign assets. Kuroda's support matters because it removes the most prominent advocate of the old easing framework from the opposition to normalization. A December or January increase is already expected. The new element is the inflation evidence: imported energy and shipping costs are moving into services prices, which the BOJ treats as a measure of underlying inflation. The precedent is August 2024, when a BOJ increase and hawkish guidance triggered a rapid unwinding of yen carry trades and a sharp one-day fall in Japanese and global equities. The likelier outcome is a hawkish hold on Friday followed by a December increase to 1.5%, conditional on the yen staying near 157 or weaker. A sudden yen rally toward 150 before December would ease the pressure and could delay the move.

## What to watch

- The language of Friday's BOJ statement on services inflation. A reference to broadening price pressure would bring forward expectations of a December increase.
- The yen's level against the dollar after Friday's decision and Wednesday's Fed meeting. A move toward 160 would raise pressure on the BOJ to act sooner.
- Japanese wage negotiations in the coming months. Strong wage demands would confirm that services inflation is becoming self-sustaining.