Bank of Japan Says "Global Economic Uncertainty High"... Interest Rate Hikes to Proceed 'Slowly'

According to the Summary of Opinions from the Financial Policy Decision Meeting
"Caution Needed for Additional Interest Rate Hikes," Suggesting a Pace Adjustment
"Uncertainty in the Pace of US Interest Rate Cuts... Patience Required"

The Bank of Japan (BOJ) Monetary Policy Meeting recently discussed concerns over uncertainties in financial markets, including those in the United States, describing the current phase as "a period of patience for the time being." A majority of policy board members expressed caution regarding interest rate hikes, with some opposing any increase.

On the 1st, the BOJ released a summary of opinions from the 'September Monetary Policy Meeting' held on the 19th and 20th of last month. The committee discussed the need to keep in mind the pace of interest rate cuts in the U.S. The committee stated, "While there is a high possibility of a soft landing for the U.S. economy, the dollar may depreciate against the yen, and stock prices could fall," adding that it may take time to determine the extent of rate cuts necessary to achieve a soft landing. At the September meeting, the BOJ kept the benchmark interest rate steady at 0.25%.

One member argued, "Given the increased uncertainty in overseas economies, it is reasonable to observe market trends and make additional adjustments to monetary easing only when uncertainties have diminished," emphasizing that "this is a phase of patience, persistently maintaining an accommodative financial environment." Another member clearly opposed raising rates, stating, "At this point, additional policy rate changes that suggest a full-scale shift to tightening policies are undesirable."

They also mentioned concerns that if the new government in the U.S. expands fiscal spending, inflation could be stimulated. The committee said it plans to monitor the impact on Japanese exports and prices by considering trends in raw material prices. It indicated that it will pay close attention to such external uncertainties when deciding future monetary policy.

Previously, at the March Monetary Policy Meeting, the BOJ ended its negative interest rate policy by raising the short-term policy rate, the benchmark interest rate, for the first time in 17 years. Subsequently, at the July meeting, based on wage growth and signs of economic recovery, the rate was increased from 0?0.1% to about 0.25%. Notably, the newly inaugurated cabinet of Prime Minister Ishiba Shigeru (67), who has expressed a positive stance on rate hikes, has drawn attention.