BoJ Minutes: Members agree it was suitable for bank to keep increasing policy interest rate
The Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Thursday, per the BoJ Minutes of the September meeting.
Key quotes
Members concurred it was suitable for the bank to keep increasing the policy interest rate and modify the level of monetary easing.
One member said it was preferable for the bank to move the policy interest rate closer to the target relatively soon and maintain flexibility for quick adjustments in either direction.
One member said it was important to show the market BOJ's resolve to prevent upward price deviations with agile response to global economic conditions.
Cabinet Office rep expects central bank to fulfill accountability on meeting decisions and closely examine cumulative effects of past rate policies.
One member noted that if signs of rising price deviation appeared, the bank would need to speed up rate hikes.
Cabinet office representative said BoJ may need to consider its estimates of neutral interest rate.
One member said BoJ did not need hasty action but should set policy to prevent excessive, persistent inflation.
One member said bank should keep acting promptly without being too cautious.
Cabinet office representative says important for BOJ to take proactive, appropriate steps amid excessive economic and market fluctuations.
Many members expressed view it was difficult to pinpoint neutral rate level in advance.
Many members said bank should modify policy while assessing changes in financial conditions including short-term interest rates and reaction to economic activity and prices.
Ministry of Finance expects central bank to carefully assess impact of policy rate shift on economy and prices.
Some members noted services prices rose steadily over recent years.
Members say if trend accelerates further, underlying inflation could rise accordingly.
One member noted that the current rate of CPI increase has largely met the price stability target.
A different member said underlying cpi inflation has already reached a level generally aligned with the 2% target.
Several members highlighted rising chances of CPI inflation increase from early autumn.
Market reaction to the BoJ Minutes
At the time of writing, USD/JPY is down 0.03% on the day at 158.39.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
