BOJ Policymakers Weigh Faster Rate Hikes Amid Inflation Risks

The Bank of Japan (BOJ) policymakers debated the need for faster interest rate hikes in July, according to minutes from their meeting. The BOJ had raised interest rates in June but paused in July before increasing them again in September to a 31-year high of 1.25%. This decision was influenced by the Middle East war and a weak yen, which drove up prices of fuel and raw material imports.

The minutes showed that many policymakers saw the need to focus on mounting inflation risks, with some calling for faster interest rate increases. One member stated, 'Markets appeared to be expecting the BOJ to raise interest rates with intervals of about six months. But the pace of rate hikes could be faster than such market expectations, given underlying inflation had approached 2% and the greater need to focus on upside price risks.'

A different member emphasized the importance of paying attention to upside price risks and 'adjusting its policy rate nimbly.' A third member warned that waiting to raise rates would result in huge damage if inflation risks materialized.