BOJ Seen Eyeing Policy Rate Hike as Early as Dec.

Tokyo, Nov. 10 (Jiji Press)–The Bank of Japan is seeking an opportunity to raise its policy interest rate, with the next rate hike possibly coming as early as December, as concerns over the Japanese and global economies caused by high U.S. tariffs have subsided. If momentum for wage hikes can be confirmed toward next year’s “shunto” spring wage negotiations, the BOJ may decide on an interest rate increase at its next two-day policy-setting meeting starting Dec. 18, which would be the first hike since January this year. As Japanese Prime Minister Sanae Takaichi, who took office last month, is an advocate of monetary easing, the BOJ may find it difficult to raise its policy rate by year-end. According to a summary of opinions released Monday from the policy-setting meeting in October, a Policy Board member said “it may be desirable to raise the policy interest rate sooner, considering the risk of prices in Japan being pushed up significantly through, for example, the yen’s depreciation.” A Policy Board member also said that “the timing at which the bank should raise the policy interest rate is getting closer,” according to the summary. At the meeting, two members, Hajime Takata and Naoki Tamura, proposed raising the unsecured overnight call rate target to around 0.75 pct from around 0.5 pct at present. Although their proposal was voted down, it highlighted a spread of opinions supporting an interest rate increase. Meanwhile, Takaichi, who has pledged to continue former Prime Minister Shinzo Abe’s “Abenomics” reflationary policy mix, places emphasis on an aggressive fiscal policy and monetary easing, calling on the BOJ to align its policies with the government’s stance. In an interview with a U.S. news agency, Fumitake Fujita, co-leader of Nippon Ishin no Kai (Japan Innovation Party), the new coalition partner of Takaichi’s ruling Liberal Democratic Party, cautioned against policy changes this year. If the BOJ raises its policy interest rate while the central government seeks to have the Diet, Japan’s parliament, pass a supplementary budget bill to finance economic measures, “it would be like a situation in which the accelerator and the brake are applied at the same time,” he said. At a press conference following the policy-setting meeting in October, BOJ Governor Kazuo Ueda suggested that the central bank would decide whether to raise its policy rate after assessing wage trends. “We are not thinking we must look at the entire spring wage negotiations, but rather want to confirm the momentum of the initial moves,” he said. END [Copyright The Jiji Press, Ltd.]