BOJ Discussed Chance of More Rate Hikes at January Meeting, Minutes Show
Following their decision to raise short-term interest rates to the highest level in 17 years, Bank of Japan (BOJ) policymakers deliberated the rate of interest rate hikes, according to Tuesday’s minutes of their January meeting.
According to the minutes, several participants acknowledged that even if the BOJ raised the policy interest rate at this meeting, actual interest rates were still projected to be considerably negative and that accommodating financial conditions would be maintained. One of those members observed that, under accommodating financial conditions, the rate hike at the meeting would prefer a change in monetary accommodation.
According to the minutes, members agreed that if the prognosis for prices and economic activity materialized, the BOJ should continue to tighten policy because accurate interest rates were at very low levels.
In a sign of confidence that growing wages will keep inflation around its 2% objective, the BOJ revised its price predictions at the January meeting and increased its short-term policy target by a quarter point to 0.5%, the highest since the global financial crisis 2008. The action came after last year’s rate rise to 0.25% in July and the decision to end an extensive stimulus program that had been in place for ten years in March.
The timing of future rate rises would primarily rely on the effect of US President Donald Trump’s blitz of tariffs; the BOJ said last week as it held interest rates unchanged and issued a warning about growing global economic uncertainty.
But BOJ governor Kazuo Ueda also pointed out the central bank’s focus on growing domestic pricing pressures by stating that rising food prices and stronger-than-expected wage growth might raise underlying inflation.
