BOJ Policymakers Eye Faster Rate Hikes Amid Inflation Risks

The Bank of Japan (BOJ) policymakers are shifting their focus towards rising inflation risks, according to minutes from their July meeting. The central bank raised interest rates in June and left them steady in July, but some members want to increase rates faster. A member noted that markets expect rate increases every six months, but this pace could be accelerated given the increasing risk of upside price risks.

Another member emphasized the need for the BOJ to pay attention to upside price risks and adjust its policy rate nimbly. A third member warned that waiting to address inflation risks would cause substantial damage to the economy if prices exceed the target. The BOJ left interest rates unchanged at 1% in July, but cautioned that underlying inflation could exceed its target of 2%.

The policymakers are redirecting their focus towards anchoring underlying inflation around the 2% target rather than aiming to lift prices. Some members believe that the risk of waiting is no longer marginal and that rate increases should be accelerated.