MNI: BOJ Board Cautious Amid Uncertainties - September Minutes
MNI (TOKYO) - Some Bank of Japan board members expressed their cautious view on further rate hikes due to uncertainties over global economies and financial markets, according to the minutes of the Sept 19-20 board meeting released on Wednesday.
“A different member commented that, while remaining convinced that it was desirable for the Bank to raise the policy interest rate without taking too much time if it was confirmed that there would be no major downward revisions to its outlook, the policy interest rate hike should not be an end in itself,” the minutes showed.
Another member said that the appropriate response at this point was to examine market developments, but, depending on developments in economic activity and prices, it was possible that raising the policy interest rate would become appropriate even when financial and capital markets were unstable.
“It seemed that, if economic activity and prices remained on track, the Bank could follow a path in which it raised the policy interest rate gradually so that the rate would be 1.0% in the second half of fiscal 2025 at the earliest,” the member noted.
The minutes also showed concern on the yen's impact on prices, with some some members noting the upside risk to prices due to higher import costs had softened as the yen's depreciation retraced.
A different member also showed a cautious view, noting Japan's economic activity and prices were currently "not in a situation where the Bank might fall behind the curve if it did not raise the policy interest rate at a certain pace.”
COMMUNICATION POLICY
Many members noted that, while the Bank had indicated its stance that it would adjust the degree of monetary accommodation if economic activity and prices developed in line with its outlook, the decision at the July 2024 meeting to raise the policy interest rate had taken the markets by surprise.
“One member expressed the view that, considering this experience, the Bank would need to communicate its policy stance and other factors to markets more carefully when conducting further policy interest rate hikes,” the minutes showed. “A few members pointed out that it was desirable that the Bank avoid as much as possible a period with no dissemination of information.”
One of these members noted the shared understanding between the Bank and markets over its language had decreased, partly because the BOJ had not raised the policy interest rate for an extended period of time.
The board held the policy rate steady at 0.25% at its most recent meeting. (See MNI BOJ WATCH: Ueda Opens Door To Dec Hike, Eyes U.S., Mkts)