BOJ Debates Price Risks Amid Interest Rate Hikes

The Bank of Japan (BOJ) policymakers debated the growing price risks even after hiking rates in June, according to minutes from the meeting. Some board members said that consumer inflation will likely increase significantly in the latter half of the fiscal year due to planned price hikes by firms for a wide range of goods.

One member noted that 'even if the Middle East conflict ends and crude oil prices decline, inflationary pressure would remain given the high costs of shipping and storage associated with the procurement of alternative sources of supply.'

The BOJ raised interest rates to 1% at the June meeting, a 31-year high, due to rising fuel costs from the Middle East conflict and mounting inflationary pressures. Two board members called for faster interest rate hikes to push the BOJ's policy rate closer to neutral levels.

Wholesale prices accelerated in June at the fastest pace in more than three years, with a 7.1% surge. Analysts expect this to push up core consumer inflation, which remained below the BOJ's 2% target in June due to government subsidies.