BOJ Policymakers Debate Faster Rate Hikes Amid Government Caution

The Bank of Japan (BOJ) policymakers debated faster rate hikes in September after raising interest rates to a 31-year high of 1.25% in that month's meeting.

While some members saw the need for accelerated pace or bringing policy interest rate closer to the BOJ's goal, others were more cautious, citing lacklustre consumption and subdued growth in services inflation as reasons to stand pat on policy.

A government representative urged the BOJ to examine carefully the cumulative effects of past interest rate hikes, further taming expectations for an October hike. This resistance from the government could push up the cost of funding ambitious spending plans, as seen by some investors who saw the representative's remarks as signalling the resistance the BOJ could face in pushing up rates further.

The yen weakened beyond 158 per dollar on Thursday as some investors saw the representative's remarks as signalling the resistance the BOJ could face in pushing up rates further. Several opinions indicated that underlying inflation had reached or was close to hitting the BOJ's 2% target, and members agreed that if signs of an upward deviation in prices were observed, the Bank would need to accelerate the pace of rate hikes.