BOJ Policymakers Weigh Faster Rate Hikes Amid Rising Inflation Risks

The Bank of Japan (BOJ) is considering faster rate hikes as inflation risks mount. According to minutes from the central bank's July meeting, several policymakers saw a growing need to focus on rising inflation risks. One policymaker noted that the pace of rate increases could be faster than market expectations for hikes at roughly six-month intervals, given that underlying inflation had moved closer to 2%.

Another member stressed the need for the BOJ to pay close attention to upward price pressures and adjust monetary policy quickly when necessary. A third policymaker argued that the risks associated with delaying further rate increases were becoming more significant, warning that a materialisation of inflation risks could cause substantial economic damage.

The comments highlight a growing debate within the BOJ over how quickly it should normalise monetary policy as inflation remains persistent and the yen stays weak. The central bank has already raised its policy rate to 1.25% in September, taking borrowing costs to their highest level in 31 years.