MNI: BOJ Opinions: Members See Rate Hike, But No Imminent Move

Bank of Japan board members largely agreed on the need to raise the policy interest rate eventually, but saw no urgency to act at the Oct 29-30 meeting, preferring to confirm sustained wage momentum and the firmness of underlying inflation, according to the summary of opinions released Monday.

“The momentum of initial moves toward next year's annual spring labour-management wage negotiations will be an important factor for the Bank to consider in making policy decisions,” one member said at the meeting, which resulted in a pause to the 0.5% policy rate. (See MNI BOJ WATCH: Ueda Hints Bank Close To Hike; Wages Key)

Another member noted that, given uncertainty regarding the impact of tariffs and developments in the global economy, particularly the U.S., "whether Japanese firms maintain their active wage-setting behaviour is especially important.”

A separate member said, “While uncertainties remain, the Bank will be in a situation where it should adjust the policy interest rate depending on the outlook for economic activity and prices and on the likelihood of achieving the outlook.”

One member said, it is likely that conditions for taking a further step toward normalisation have almost been met. "However, the Bank needs to examine to what extent the underlying inflation rate has become entrenched,” the member noted.

Another added that, “If it is confirmed that firms' active wage-setting behaviour will be maintained – judging from, for example, moves by both labour and management in the initial stages of the annual spring labour-management wage negotiations – this is likely to lead to a policy change.”

One board member took a more cautious view, saying, “Although the timing at which the Bank should raise the policy interest rate is getting closer, it is appropriate to take a little more time to examine the situation, taking into account, for example, that uncertainty regarding U.S. tariff policy remains high and the direction of the economic policy of Japan's new administration is not yet fully clear.”

INFLATION VIEWS

“Inflation expectations of firms and households have already reached approximately 2%, an inflationary norm has been established, and upside risks to prices warrant attention,” one member argued.

Another commented, “The deflationary norm has already been dispelled and upward pressure on wages has also increased. It is necessary to pay more attention to the upside risks to prices when considering the risk balance.”

A different member said, “In examining price developments, it will be necessary to closely monitor, for example, consumer purchasing behavior and whether firms maintain their stance toward prices.”