A Bank of Japan (BOJ) board member has urged the central bank to raise interest rates "without becoming overly cautious" when possible, according to a summary of opinions from its October policy meeting released Tuesday. The statement reflects the BOJ's eagerness to continue tightening monetary policy as underlying inflation has "generally" reached its 2 percent target after years of unconventional easing.
At the October 29-30 meeting, the BOJ noted that Japan's core consumer prices, excluding volatile fresh food items, rose 2.1 percent in September from a year earlier, surpassing the central bank's inflation goal for the first time in nine months. This has fueled speculation among BOJ watchers that another rate hike could come as soon as December, particularly as Middle East tensions and yen depreciation may further drive up inflation.
Some Policy Board members argued for a quicker move toward the "neutral interest rate," which would balance economic growth without overheating or cooling it too much. One member pointed out that "financial conditions have remained accommodative." However, another member cautioned about the potential negative effects of rate hikes, warning that past increases could "exert downward pressure on economic activity and prices."
The BOJ last raised its policy rate to 1.25 percent from 1.0 percent in September, marking the first increase in three months and the shortest interval between hikes since ending its decade-long unconventional easing in March 2024. The central bank's actions have drawn criticism from Prime Minister Sanae Takaichi, who has expressed dissatisfaction with the BOJ's hawkish stance. A Cabinet Office official was quoted during the October meeting as saying the Japanese economy is at a "crossroads," questioning whether it can achieve a "virtuous cycle of growth."