Many BOJ Members Called for Continued Rate Hikes: Summary

Tokyo, June 24 (Jiji Press)–Many Bank of Japan policymakers cited the need for the central bank to continue increasing interest rates, at its latest policy meeting in which the first rate hike since last December was decided, according to a summary of opinions released by the BOJ on Wednesday. At the June 15-16 Policy Board meeting, one member said, “It is appropriate for the bank to raise the policy interest rate and adjust the degree of monetary accommodation” amid the risk of the country’s core consumer price growth topping the BOJ’s target of 2 pct due to rising crude oil prices. Some members voiced support for continued rate hikes, with one of them saying that it is “desirable” to consider whether to raise rates at a pace of every few months as the neutral interest rate, which neither stimulates nor cools the economy, is believed to be around 2 pct, the summary showed. Another member said that the BOJ “should maintain its stance to continue to raise the policy interest rate,” noting that financial conditions are expected to remain accommodative after the rate hike “at this monetary policy meeting.” BOJ Governor Kazuo Ueda was absent from the meeting because he was hospitalized at the time. Voting took place among the remaining eight members of the board, with the rate hike to around 1 pct from around 0.75 pct approved by a vote of seven to one. One Policy Board member believed to be Toichiro Asada, who voted against the policy rate hike, said that the BOJ should “hold the rate steady at this point” because a rate hike “could suppress aggregate demand by curbing firms’ business fixed investment, potentially inducing simultaneous declines in inflation and in production and employment,” according to the summary. At the meeting, the BOJ also decided to halt reductions in its outright purchases of Japanese government bonds from April 2027. One board member said the move would not “hamper market functioning.” Regarding the domestic economy, one board member said that the downside risks “have decreased,” citing strong artificial intelligence-related demand, various government measures and progress in securing alternative sources of raw materials. A Cabinet Office representative at the BOJ meeting expressed concern about the possibility of the rate hike weighing on the economy, saying, “It is important for the bank to fulfill its accountability…while taking proactive and appropriate action in the event of excessive fluctuations in economic activity.” END [Copyright The Jiji Press, Ltd.]