BOJ policymakers seek faster rate rises as inflation risks mount
Bank of Japan policymakers called for more agile monetary tightening in July, warning that delayed action could deepen the economic damage caused by rising prices.
- Bank of Japan policymakers from the July meeting signaled that interest rates might need to rise more quickly due to intensifying upside risks to inflation.
- One member warned that waiting too long to raise rates could force "rapid and substantial" hikes later, creating a "double shock" for the economy.
- The pace of future rate increases could be faster than the market's expectation of one hike every six months.
- Some policymakers advocate for a "nimble approach," adjusting the size and timing of rate hikes based on changing conditions rather than following a predetermined schedule.
Bank of Japan (BOJ) policymakers signalled that policy rates might need to rise more quickly as upside risks to inflation intensified, according to a summary of views from the central bank’s July 30–31 monetary policy meeting released on Monday (August 10).
One member rejected the proposition that the “risk of waiting is marginal” and urged the BOJ to withdraw monetary support more rapidly.
The policymaker warned that the materialisation of upside price risks could deal a “significant blow” to Japan’s economy and people’s daily lives.
Waiting too long could then force the central bank to impose “rapid and substantial policy interest rate hikes”, creating a “double shock” for the economy.
Another opinion described the BOJ as entering a “new phase” requiring a “nimble approach”.
It argued that policymakers should consider the size of each rate rise as circumstances changed instead of following a predetermined timetable.
A separate board member called for the timing and pace of future increases to be determined through careful assessment of developments in the Middle East, expanding artificial intelligence-related demand and movements in foreign exchange markets.
The member also stressed the need to closely monitor upside risks to underlying inflation.
Market participants had widely anticipated one BOJ rate rise every six months.
However, one policymaker indicated that future increases could come faster than markets expected, the summary showed.
[Copyright The Jiji Press, Ltd.]
