Bank of Japan minutes show debate over faster rate increases
Minutes published on September 28 show some Bank of Japan members debating faster rate increases as upside inflation risks grew. At the July meeting, the bank held its rate around 1 per cent, while one member proposed a rise to around 1.25 per cent. The release records the views behind that July pause. One member said the pace could exceed the roughly six-month interval markets expected. The bank made no new rate decision on September 28.
Economics & Markets··Midday
July hold drew a proposal to raise rates
The Bank of Japan published minutes on September 28 for its July 30–31 monetary-policy meeting. The board had kept the overnight policy rate around 1 per cent. Most members wanted to watch the effect of June’s increase on economic activity and prices. One member instead proposed a rise to around 1.25 per cent in July. Members considered faster rate moves in response to upside inflation risks. The bank made no new interest-rate decision on September 28; it published the minutes of its July meeting.[1], [2]
Inflation risks put the pace in question
Some members wanted greater weight placed on upside price risks. One member said markets expected roughly six months between increases, yet a quicker pace might be needed as underlying inflation approached the 2 per cent goal. Members also discussed inflation expectations and movements in the yen. Higher oil and other raw-material prices were described as a strain on Japan’s terms of trade, given its reliance on imported energy. Continued wage gains mattered to members considering whether underlying inflation would settle near 2 per cent. One member cited base-pay rises of about 3 per cent at large firms. These were positions recorded in the July deliberation, not a rate path announced in September.[1]
Why some members waited after June’s increase
Members who favoured waiting pointed to the time needed for June’s rate increase to affect activity and prices. One member estimated a lag of roughly one to one and a half years. Bank staff reported that monthly Japanese government-bond purchases had fallen from about 2.7 trillion yen in June to about 2.5 trillion yen in July. The board also discussed how developments in the Middle East could affect oil prices and the outlook. The Policy Board approved these minutes at its September 17–18 meeting, and the bank published them on September 28. Those are separate dates for the July policy discussion, approval of its record and public release.[1]
