Shirai believes that raising rates could help prevent excessive declines in the yen without provoking complaints from other nations, despite existing G7 and G20 agreements against using monetary policy for currency manipulation.

Sayuri Shirai, a former board member of the Bank of Japan (BOJ), has suggested that the central bank may raise interest rates in March due to increasing inflation pressures linked to U.S. tariff threats.

She highlighted that Japan's domestic inflation is already elevated, making March a potentially opportune time for the BOJ to implement a rate increase.

While the BOJ aims to stabilize the yen, it has refrained from explicitly stating that rate hikes are intended to strengthen the currency to avoid potential G20 complaints.

As of February 21, 2025, the yen is trading at approximately 150 to the dollar, having rebounded from a low of 162 in July 2024, yet it remains undervalued and poses challenges for the economy.

Governor Kazuo Ueda has expressed a willingness to continue raising rates if wage growth supports consumption, which could lead to further hikes to 1.0% later in 2025.

In January 2025, the BOJ ended a decade-long monetary stimulus by raising its short-term interest rate to 0.5%, reflecting progress toward its 2% inflation target.

Despite the broader economy's weaknesses, Shirai emphasized the necessity of rate hikes to combat inflation driven by a weak yen, which is increasing food and energy prices.

She also warned of uncertainties regarding the impact of Trump's tariffs on currency movements, which could influence future BOJ decisions on interest rates.

A Reuters poll indicates that a majority of economists expect the BOJ to raise rates to 0.75% later this year, primarily during the third quarter, although many do not foresee a hike at the March 18-19 meeting.

Shirai noted that President Trump's tariff policies, including a 10% levy on Chinese imports and potential tariffs on European goods, could further exacerbate global inflation.