A Bank of Japan summary showed policymakers debating whether interest rates should rise more quickly after September’s increase. Some members said the policy rate should move closer to the bank’s approximate goal relatively soon or rise faster if prices deviated upwards. Other participants argued that weak consumption and moderate services inflation warranted patience. Government representatives also asked the bank to assess the cumulative effect of earlier increases.
The BOJ raised its policy rate to a 31-year high of 1.25% at the 17-18 September meeting. The summary, published on 1 October, records opinions rather than attributing each comment to a named participant. It said underlying inflation was near the bank’s 2% target, although views differed on whether it had conclusively reached that level. The policy board’s next meeting is scheduled for 29-30 October.
UPSIDE PRICE RISKS SUPPORT FURTHER TIGHTENING
Several opinions said financial conditions remained accommodative and further rate increases would be appropriate if the economy and prices followed the bank’s outlook. One view called for faster action if inflation showed an upward deviation. Another favoured timely tightening without excessive caution because the policy rate remained around the lower end of estimated neutral-rate ranges.
The case for tighter policy rested partly on resilient activity, stronger global artificial-intelligence demand and higher import costs linked to the Middle East. Some members said the risk balance had shifted towards prices rather than weaker growth. The summary nevertheless noted that private consumption remained subdued and recent services-price growth had not accelerated.
GOVERNMENT REPRESENTATIVES URGED CAUTION
The Cabinet Office asked the BOJ to examine carefully the cumulative effects of past rate increases and consider estimates of the neutral rate. The Ministry of Finance requested clear communication and an assessment of September’s move on activity and prices. Those interventions did not reject further tightening but emphasised the need to test its economic effects.
The October meeting will show whether the board judges that inflation risks require another near-term increase or more observation. Incoming consumption, wage and price data will be central to that decision. The bank’s updated quarterly outlook should also clarify whether the September hike began a faster sequence or remains part of a gradual adjustment.