Sato Supports Gradual Rate Increases
Ayano Sato, a member of the Bank of Japan's policy board, has voiced her backing for lifting the central bank's policy interest rate in gradual steps, a stance that leaves the door open to additional increases. Speaking in a recent Kyodo News interview, Sato, who became a board member in June, explained that decisions on when to raise rates again ought to reflect how private consumption and income are developing. She would not discuss when the next hike might come. According to Sato, raising rates can help bring about sustainable economic growth.[S1]
In the previous month, the BOJ lifted its key interest rate to 1.25 percent, the highest level in 31 years, a move that pointed to possible further increases. At the September meeting, Sato and Toichiro Asada were the two members who voted against raising rates. Both are viewed as reflationists, favoring easy monetary policy and heavy fiscal outlays. Because their dissent suggested additional hikes would be hard to achieve, the yen came under selling pressure versus the dollar, with traders anticipating that the interest rate differential between the United States and Japan would stay wide.[S1][S2]
Consumption Weakness and Inflation Risks
Sato explained that her vote against the earlier rate increase stemmed from private consumption lacking much momentum. She would not name the specific economic indicators behind that judgment, noting only that she reviews a broad set of data. She added that inflation risks to the upside have grown somewhat, pointing to Middle East instability and rising crude oil prices. She also cautioned that robust artificial intelligence-driven demand might fade quickly if major companies change course, and that the outlook could turn sharply pessimistic. Should Middle East conditions keep worsening, she said, the economy could cool fast and inflation could ease.[S1]
The government of Prime Minister Sanae Takaichi, which has shown reluctance about raising rates, selected Sato for the BOJ board. Sato emphasized that the central bank ought to reach policy decisions on its own, even as it ultimately brings its policy into line with the government's expansionary fiscal approach.[S1]
