BOJ Policymakers Eye Faster Rate Hikes Amid Rising Inflation Risks

The Bank of Japan (BOJ) debated the need for faster interest rate hikes at its July meeting, according to minutes released on Monday. Many policymakers saw the risk of inflation increasing and called for a quicker pace of rate increases.

After raising rates in June, the BOJ paused in July before pushing its policy rate to 1.25% this month. This move was driven by concerns about the impact of the Middle East war on Japan's economy and the resulting increase in fuel and raw material imports.

The minutes showed that some members believed the BOJ should focus on anchoring underlying inflation around its 2% target, rather than pushing up prices. One member noted that market expectations for rate hikes were about six months apart, but suggested a faster pace could be necessary given the rising risk of inflation.

Another member emphasized the need to adjust policy rates 'nimbly' in response to upside price risks. A third member warned that waiting too long to raise rates would result in significant economic damage if inflation materializes.