Inflation Risks Dominate July Discussion
According to Reuters coverage of the July meeting minutes, Bank of Japan officials broadly shared the view that growing inflation dangers warranted close monitoring, and a number of them pushed for lifting rates more quickly. The minutes, made public on Monday, strengthened the argument for further tightening of still-low borrowing costs. The BOJ had hiked in June, paused in July, and then raised its policy rate in September to 1.25%, a 31-year peak. The Middle East conflict and a chronically weak yen were named as forces driving up imported fuel and raw material prices.[S1]
Policy Focus Shifts Toward Anchoring Inflation
As price pressures mounted, a majority of the nine-member board signaled that the BOJ was steadily shifting its policy emphasis toward keeping underlying inflation near 2%, instead of trying to generate price growth, the minutes indicated. One board member pointed out that market participants seemed to anticipate rate hikes roughly every six months, while cautioning that increases might come sooner than that, since underlying inflation was nearing 2% and the need to watch upside price risks had grown.[S1]
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Some Members Call for Accelerated Rate Increases
A separate board member stressed the importance of closely monitoring upside price risks and adjusting the policy rate with agility, the minutes showed. Yet another said the BOJ should speed up rate increases, since the cost of delay was no longer negligible, and warned of serious harm to the economy should inflation risks materialize. During the July 30-31 meeting, the BOJ kept rates at 1% and warned that underlying inflation might overshoot its target, adding that upcoming policy talks would focus on upside price risks.[S1]
