Bank of Japan policymaker highlights economic risks of rate rise
The central bank held its policy rate at around 1.25%, while members weighed wage trends and the risk that another increase could weaken the economy.
- A Bank of Japan policymaker expressed concern that a further interest rate increase could slow the economy and reduce underlying inflation.
- This caution was voiced even as other members on the policy board argued for an early rate hike, citing that the bank's 2% inflation target has been met.
- Those in favor of an increase want to move to a neutral policy rate "at an early stage," arguing that financial conditions remain supportive of economic activity.
- As part of the cautious approach, policymakers are closely watching the outcome of upcoming spring wage negotiations as a key factor for future decisions.
The Bank of Japan's (BOJ) latest summary of opinions, published on Tuesday (November 10, 2026), showed support among some policymakers for an early policy interest rate increase, alongside concern about the economic impact of a further rise.
The Policy Board made no change to the policy rate at its October 29–30 meeting, leaving it at around 1.25%.
The bank had reached that level in September, three months after increasing the rate by 0.25 percentage point to around 1% in June.
Members acknowledged that underlying inflation, which excludes temporary influences on prices, had reached the bank's 2% target.
A separate forecast from one member put the annual increase in the core consumer price index (CPI), excluding fresh food, above 3% towards the end of the current financial year in March 2027.
For one member, achieving the inflation target made an early move to a neutral policy rate necessary.
This level would neither stimulate the economy nor slow it down, and the member wanted the bank to reach it “at an early stage”.
Financial conditions that continued to support economic activity were another reason given for moving more quickly towards that neutral level.
Among the other members favouring an early increase, one argued that the BOJ “needs to step up the pace”.
The possibility of a further policy rate increase slowing the economy and reducing underlying CPI inflation prompted caution from a different member, who considered it “necessary to pay due attention to the risk”.
Close monitoring of pay increases at Japanese companies was also urged.
“The perspective of anchoring underlying CPI inflation at around 2% becomes important,” one member said.
The outcome of the next spring wage talks between employees and management was a particular focus for that member: “For the time being, the outcome of next year's annual spring labor-management wage negotiations warrants attention.”
The October meeting also set a higher annual amount for sales of exchange-traded funds (ETFs), which the bank had bought under its former large-scale monetary easing programme to stimulate the economy.
Sales will increase from 330 billion yen to 860 billion yen a year starting in January 2027, with the amounts measured using the values recorded in the bank's accounts.
According to one member, selling ETFs more quickly “at this juncture” was “appropriate” because the value of stock market trading had been increasing.
[Copyright The Jiji Press, Ltd.]
