MNI: BOJ Should Cautiously Mull Rate Hikes - Oct Opinions
MNI (TOKYO) - The Bank of Japan must carefully consider policy interest rate hikes, according to some board members at the Oct 30-31 meeting, and despite the board's view that it would gradually increase the rate, the summary of opinions showed on Monday.
“The BOJ needs to pay due attention to the future course of overseas economies, particularly the U.S. economy, and developments in financial and capital markets," noted one board member. "It also needs to examine how these factors will affect the outlook for Japan's economic activity and prices, the risks surrounding them, and the likelihood of realising the outlook.”
“As the Bank has been expecting to raise the policy interest rate at a moderate pace, it has time to monitor the future course of the U.S. economy, including that after the presidential election,” noted a separate member, adding the bank cannot judge the stability of markets.
Another member said, considering the heightening uncertainties in Japan and abroad, "the Bank needs to conduct monetary policy with caution. Therefore, the Bank should maintain the current policy at this meeting.”
A different member said that the shift to "a state with positive interest rates" entails uncertainties, and it is therefore necessary for the Bank to take time and exercise caution when raising the policy interest rate.
Another member said, “With the monetary policies of the Bank and the Federal Reserve moving in opposite directions, the markets, particularly foreign exchange markets, could see large fluctuations. Attention is warranted on the risk that monetary policy normalisation over the long run will be hindered if further rate hikes by the Bank trigger a shock in the markets.”
A different member called on the bank to maintain the current policy interest rate for the time being, "until it examines various economic data to assess factors such as corporate profits, business fixed investment, private consumption, the cost pass-through rate, and developments in structural business reforms by firms, and becomes more confident about the sustainability of the virtuous cycle between wages and prices.”
The Board held the policy rate steady at the October meeting. (See MNI BOJ WATCH: Ueda Opens Door To Dec Hike, Eyes U.S., Mkts)
CPI STANCE
“Looking at the year-on-year rate of change for October in the CPI for Tokyo's 23 wards, while the rates for rice prices and -- due to the rise in rice prices -- dining-out increased, it can be assessed that the developments in the CPI for other items, including services for which prices were revised, were generally in line with the Bank's outlook,” noted one member.
Another member said, “Since previous cases suggest that it takes about six months for import prices to have their greatest effect on the CPI, it is likely that the waning of the effects of import price rises will run its course in the near future.
There is concern over how prices will be affected by the future course of fiscal policies in Japan and the United States, as well as by developments in foreign exchange rates reflecting these policies.”