Bank of Japan faced calls for faster rate rises as inflation risks grew
Japan’s central bank agreed in September to lift rates to 1.25%, about three months after June’s increase, the shortest gap under Governor Kazuo Ueda.
- At its July meeting, some Bank of Japan (BOJ) board members called for faster interest rate increases, though rates were ultimately left unchanged at that time.
- The primary motivation for these calls was growing inflation risk, with members noting that underlying inflation was approaching the 2% target.
- A specific concern was raised that further weakness in the yen could add to inflationary pressure.
- One member argued that the risk of delaying rate hikes was no longer minor and that quicker, gradual adjustments would prevent the need for rapid increases later.
The Bank of Japan (BOJ) left interest rates unchanged at its July 30–31 meeting, even as calls were made for faster increases amid growing inflation risks, minutes showed on Monday (September 28).
At the next BOJ policy meeting in September, a rise in the policy rate to 1.25% was approved.
The previous increase had been in June, roughly three months earlier, making this the shortest gap between rate hikes during Governor Kazuo Ueda’s tenure.
Whether underlying inflation would settle around 2% was an important question for many BOJ Policy Board members at the July meeting.
They said the measure, which excludes temporary factors, was nearing that rate.
A member also expressed concern that further yen weakness could add to inflationary pressure.
Quicker adjustments to monetary accommodation were urged by a BOJ board member, who said the risk of waiting was no longer minor.
Gradual adjustments would benefit all economic participants in the long run and prevent rapid interest rate increases later, a member said during the same July discussions.
[Copyright The Jiji Press, Ltd.]
