BOJ debated chance of near-term rate hike, meeting summary shows
FILE PHOTO: The Japanese national flag waves at the Bank of Japan building in Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/File Photo
TOKYO :Bank of Japan board members debated the feasibility of raising interest rates in the near term with some suggesting the time for such a move may be approaching, a summary of opinions at the central bank's September policy meeting showed on Tuesday.
Many opinions at the meeting called for vigilance over mounting inflationary pressure, the summary showed, adding to signs of a hawkish shift on the board that heightens the chance of a rate increase in October.
"Judging solely from the perspective of Japan's economic conditions, it may be time to consider raising the policy interest rate again, given that it has been more than six months since the last rate hike," one opinion was quoted as saying.
With uncertainty over U.S. tariffs and other external headwinds receding, the BOJ has scope to raise Japan's real interest rate that remains low by global standards, another opinion said, according to the summary.
At the September 18-19 meeting, the BOJ kept interest rates steady at 0.5 per cent, but two of the nine board members dissented and instead unsuccessfully called for a hike to 0.75 per cent.
The last time it raised rates was in January. Since then, the BOJ has signalled a pause to scrutinise the impact of U.S. tariffs on Japan's export-reliant economy.
The dissent by board members Hajime Takata and Naoki Tamura was seen by markets as a prelude to a near-term increase in borrowing costs. In a speech on Monday, dovish member Asahi Noguchi said the need for a rate hike was increasing "more than ever."
Markets are now pricing in roughly a 60 per cent chance of a rate hike at the BOJ's next meeting on October 29-30. Investors are focusing on the BOJ's "tankan" quarterly business survey, due on Wednesday, and Governor Kazuo Ueda's speech on Friday, for clues on the timing of the next rate hike.
If economic and price developments do not deviate much from the anticipated path, the BOJ should raise rates at "somewhat regular intervals," a third opinion said, adding the tankan and corporate first-half earnings reports may help to decide whether a hike would be appropriate.
Of the opinions on monetary policy, five suggested resuming rate hikes in the foreseeable future in a sign of broadening calls within the board for a near-term increase.
Some, however, called for caution. One member said it would not be too late to raise rates after assessing "a little more hard data" as Japan's domestic demand tends to be vulnerable to external shocks, the summary showed.
"A rate hike at this point, which would come as a surprise to the market, should be avoided," another opinion showed.
On the price outlook, many pointed to inflationary pressure with one saying firms were continuing to increase prices even as rises in import costs dissipate, the summary showed.
"There seems to be a higher likelihood the cost pass-through to food prices will continue, taking into account data and anecdotal information," another opinion showed.
Prices of 20,381 food items are expected to rise this year, up 62.8 per cent from last year, a survey by private think tank Teikoku Databank showed on Wednesday, a sign food inflation was accelerating, adding to the strain on household budgets.
The BOJ's summary, released several market days after each policy meeting, does not identify the names of the members who made the comments.
