BOJ board turns hawkish, with many calling for more rate hikes

TOKYO (Reuters) -- Bank of Japan board members turned overwhelmingly hawkish at their April policy meeting, with many calling for raising interest rates steadily to forestall risks of an inflation overshoot, a summary of opinions at the meeting showed.

Some members saw the chance of a faster-than-expected pace of interest rate hikes on heightening prospects of inflation durably staying, or even exceeding, the BOJ's 2% target, the summary showed on Thursday.

"If underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will accelerate," one member was quoted as saying.

The debate underscores BOJ Gov. Kazuo Ueda's recent remarks signaling the chance of multiple rate hikes ahead and heightens the possibility of an increase in short-term borrowing costs in coming months.

The BOJ's hawkish signals, however, have failed to prop up the yen as markets continued to focus on receding prospects of near-term U.S. interest rate cuts that will keep the U.S.-Japan interest rate gap wide. The dollar stood at 155.56 yen on Thursday, up from last week's low of 151.86.

At the April meeting, the BOJ kept interest rates near zero and produced fresh quarterly estimates that projected inflation to stay near 2% through early 2027, signaling its readiness to hike borrowing costs later this year.

Many of the opinions shown in the summary called for the need to raise interest rates steadily and consider reducing the size of the BOJ's bond purchases sometime in the future.

One member said the BOJ should consider raising rates moderately to avoid being forced to hike in a "discontinuous and rapid" way once its price target is