BoJ Summary of Opinions: Member says appropriate to continue raising rates
The Bank of Japan (BoJ) published the Summary of Opinions from the October monetary policy meeting, with the key findings noted below.
Key quotes
One member said maintaining policy is suitable to assess risks around economy, prices a bit more.
One member notes some economic weakness, urges careful monitoring of economic and price outlook.
One member says appropriate to continue raising rates as underlying inflation nears price target levels.
One member said central bank should raise rates when feasible without excessive caution.
One member said Japan entering new phase requiring faster rate hikes toward neutral levels.
One member said underlying inflation has hit 2%, BoJ must raise policy rate to neutral level soon.
One member said BOJ must observe financial conditions for several months after each rate increase in adjusting monetary easing.
One member said central bank must move policy rate to neutral early for flexible response in hikes and cuts.
One member said must watch risk future rate hike will weigh on economy, push down inflation.
One member says Japan’s neutral rate likely well above 1%.
One member said next rate increase unlikely to significantly hurt economy on net basis.
One member said outcome of next year's annual pay talks warrants attention.
One member said wage growth for next year unlikely to rise much from this year, risk of second-round effects low.
Market reaction
At press time, the USD/JPY pair trades 0.12% higher at around 158.07.
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.
