BOJ debated need to keep raising rates, October meeting minutes show

TOKYO: Bank of Japan policymakers debated the need to continue raising interest rates to levels deemed neutral to the economy with some arguing doing so would help achieve long-term, stable growth, minutes of their October meeting showed on Wednesday.

A few in the nine-member board also said recent yen declines could lead to an overshoot in inflation by pushing up import costs, the minutes showed.

“Some members said given the neutral interest rate was higher than the current policy interest rate, adjusting the degree of monetary accommodation in accordance with improvement in economic activity and prices would help achieve economic and price stability in the long run,” the minutes showed.

At the October 29-30 meeting, the BOJ kept interest rates steady at 0.5% but Governor Kazuo Ueda sent a strong signal on the chance of a near-term rate hike. Hawkish members Hajime Takata and Naoki Tamura dissented, and proposed unsuccessfully to hike rates to 0.75%.

At the subsequent meeting in December, the central bank raised rates to 0.75%, a level unseen in 30 years.

The October minutes showed many members already seeing conditions ripe for a rate hike, but wanting a bit more clarity on whether companies would keep hiking pay next year amid lingering uncertainty over the impact of higher US tariffs.

One member also pointed to uncertainty over the policy direction of Prime Minister Sanae Takaichi’s new administration as a reason to stand pat, the minutes showed.

The BOJ’s October meeting was held just over a week after the Takaichi administration’s inauguration on October 21, leaving central bank policymakers with little time to sound out the new government’s views on monetary policy.