Several Bank of Japan (BOJ) policymakers believe the central bank may need to continue raising interest rates, according to a summary of opinions from its September monetary policy meeting. Some policymakers argued that rates should be moved closer to a level that allows the bank to respond more flexibly to future economic and price developments.
The BOJ raised its policy rate to 1.25% in September, the highest level in about three decades. Policymakers are increasingly focused on preventing inflation from rising persistently above the bank’s 2% target.
One policymaker said the BOJ should accelerate rate increases if there are signs that prices are moving above the target. Another argued that the bank should bring rates closer to its estimated neutral range relatively soon.
However, there are also concerns about the impact of higher borrowing costs. Some policymakers pointed to weak consumption and subdued services-sector inflation, while a government representative urged the BOJ to carefully assess the cumulative effects of previous rate increases.
The latest comments have increased attention on the possibility of another rate hike later this year. However, markets have not viewed the September meeting summary as sufficient evidence that the BOJ will necessarily raise rates at its October meeting.
Meanwhile, Japan’s latest Tankan business survey showed sentiment among large manufacturers improving, with the index rising from 22 to 24, providing another indication of resilience in the Japanese economy.
News as Reported.
