MNI: BOJ Board Split On Rate Hike; JGB Cuts Agreed - Opinions

Bank of Japan board members were divided on the timing of rate hike at the June 13-14 policy-setting meeting, the summary of opinions showed on Monday.

Some board members saw the need to consider raising the policy interest rate appropriately.

“It is therefore necessary for the Bank to consider whether further adjustments to monetary accommodation are needed from the perspective of risk management,” one member said.

Another member noted, although price developments were on track to achieve the 2% price-stability target in the second half of fiscal 2025, "upside risks to prices have become more noticeable.”

“It is necessary for the Bank to continue to closely monitor relevant data in preparation for the next MPM -- taking into account that the upside risks to prices have affected consumer sentiment -- and if deemed appropriate, it should raise the policy interest rate not too late, in response to an increase in the likelihood of achieving the target,” the same member added.

The BOJ held its policy rate steady early this month. (See MNI BOJ WATCH: Cuts To Bond Buys Detailed In July, Hike Eyed)

BOARD DIVISION

Others held a different opinion, with one noting any change in policy should be considered only after economic indicators confirm "that, for example, the CPI inflation rate has clearly started to rebound and medium to long-term inflation expectations have risen.”

A different member said, while private consumption lacks momentum, "there have been successive unexpected suspensions of shipments at some automakers. As the Bank needs to assess the effects of these factors, it is appropriate that it continue with the current monetary easing for the time being.”

JGB BUYING

As for the reduction of Japanese government bond buying, many members emphasised the need to gradually lower the scale of bond buying.

However, specific numbers aimed at the scale and pace of the reduction were not mentioned.

“The Bank should reduce its purchase amount of Japanese government bonds (JGBs) to ensure that long-term interest rates will be formed more freely in financial markets,” one member argued. “In doing so, it is appropriate for the Bank to make a sizeable reduction in the purchase amount in a predictable manner, while securing flexibility to ensure stability in the JGB market.”

Another member said, “The Bank can determine the appropriate amount, pace, and framework for the reduction of JGB purchases and reduce the purchase amount of JGBs without causing market disruption.”

“It is better not to decide on a specific plan at this MPM but to collect views from market participants before making a decision, in order to reduce the purchase amount of JGBs to a greater extent,” the member added.