FX.co ★ BoJ Policymakers See Scope for Faster Rate Hikes

Bank of Japan policymakers signalled growing support for additional interest-rate increases, with some advocating a faster pace of tightening or a move to bring rates closer to the central bank’s “goal” in the near term. The views, presented in a summary of opinions from the September meeting, bolstered expectations of another rate hike as inflationary pressures persist.

One board member argued that the BoJ should accelerate tightening if price developments show signs of exceeding its current outlook, while another stressed that rates should be raised toward a neutral level to ensure sufficient policy space to respond to future economic shocks. Several members observed that underlying inflation had reached, or was close to, the 2% target, and some cautioned that price pressures could prove persistent.

Policymakers also pointed to upside risks to inflation from elevated crude oil prices, exacerbated by tensions in the Middle East. The BoJ lifted its policy rate to 1.25% in September, and the Governor has since signalled a stronger emphasis on preventing inflation from significantly overshooting the 2% target.