BoJ Summary of Opinions: Member says suitable to keep hiking as conditions remain accommodative
The Bank of Japan (BoJ) published the Summary of Opinions from the June monetary policy meeting, with the key findings noted below.
Key quotes
One member said it’s become more suitable to modify monetary support as currency moves raise import costs
One member says suitable to keep raising interest rate as financial conditions remain accommodative
Even after June rate increase, central bank must keep option for further hikes if economy, prices follow forecasts.
One member says policy rate should be raised toward neutral level as soon as possible.
One member said central bank must raise policy rate near neutral soon to prevent large, abrupt hikes later.
Japan's neutral rate is about 2%, BOJ should raise rates every few months.
Cabinet office representative states BOJ must ensure accountability on rate hike, take proactive, appropriate steps amid excessive economic fluctuations.
Cabinet Office rep says BOJ must assess macroeconomic effects of shrinking balance sheet, take steps for market stability.
One member notes concern over economic slowdown has eased.
Downside risks to output, employment could disrupt virtuous cycle between wages and prices, possibly drive Japan back into deflation.
Downside risks to output, employment could disrupt virtuous cycle between wages and prices, possibly drive Japan back into deflation.
One member warns firms' active price-setting could drive inflation higher.
One member notes wholesale price increases clearer, especially in distribution costs, may impact core inflation.
Inflation expectations shift, negative real rates boost lending, CP issuance and asset prices.
Global AI demand is boosting economic activity and prices beyond expectations.
One member said even if crude oil prices decline, upward price pressures likely to spread across broader range of items.
One member says no justification to stop lowering JGB purchases.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.02% on the day to trade at 161.60 as of writing.
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.
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