BOJ Policymakers Warn of Inflation Risks Pointing to September Rate Hike

The Bank of Japan's policymakers have expressed concerns about growing inflation risks that could necessitate an earlier-than-expected increase in interest rates. According to a summary of opinions at their July meeting, released on Monday, many board members believe the BOJ must be more vigilant regarding the risk of underlying inflation surpassing its 2 percent target.

The warning signs include rising import costs due to the weak yen, price pressures from strong demand for AI, and high fuel costs stemming from the Middle East conflict. Some policymakers called for a 'faster-than-expected' pace of rate hikes, while others emphasized the need for 'nimbly' raising interest rates to address inflation risks.

One board member stated that the risk of waiting is no longer marginal and that the BOJ must accelerate the pace of adjustment to its monetary accommodation. This opinion aligns with Governor Kazuo Ueda's hawkish communication after the central bank's July meeting, where it kept interest rates steady but signalled a strong chance of a rate hike as soon as September.