BOJ Eyes Further Rate Hikes Amid Inflation Fears

The Bank of Japan (BOJ) is considering further rate hikes despite raising its June benchmark rate to 1%, the highest in 31 years. The decision was made after a discussion on price risks, with some members calling for faster rate increases and pushing the policy rate closer to a neutral level for the economy.

The BOJ's minutes revealed that two members wanted to increase rates more quickly, arguing that even if the conflict in the Middle East ends and crude oil prices fall, price pressures will remain due to high transportation and storage costs. Some board members also forecasted that consumer prices would rise sharply in the second half of this fiscal year.

U.S. Treasury Secretary Scott Bessent urged Japan to move away from its low interest rate policy, saying 'Now is the time for Takaichinomics.' The weak yen and labor shortages were also mentioned as contributing factors to price pressures. In June, wholesale prices rose at the fastest pace in more than three years, with a 7.1% surge in the producer price index (PPI).

The BOJ later held rates steady at its July meeting but signaled the possibility of a September hike by stating that future policy discussions would focus on upside price risks.