BOJ Hikes Rates to 31-Year High Amid Broadening Inflation Concerns

The Bank of Japan (BOJ) has lifted interest rates to a 31-year high of 1% and is considering another hike as soon as September. According to the minutes from their June meeting, policymakers are more concerned about broadening inflation than a one-off price increase.

Several BOJ members pointed out that companies are planning price hikes across various goods later in the fiscal year, with costs potentially remaining sticky even if oil prices fall due to expensive shipping and storage. This is significant because Japan's June producer price index rose 7.1%, its fastest pace in over three years.

The BOJ's tone sounded more divided and slightly hawkish, with two board members advocating for faster steps toward a 'neutral' rate, meaning a level that neither stimulates nor slows the economy. Officials also discussed steadily shrinking the BOJ's huge balance sheet, which would mean gradually buying fewer bonds.