MNI BRIEF: BOJ's Nakagawa Sees Gradual Hikes; No Timing Hint

Bank of Japan board member Junko Nakagawa on Thursday backed a gradual rate hike but gave no guidance on the timing, citing high uncertainty.

“Given the current level of real interest rates, if the outlook for activity and prices is realised, the Bank will continue to raise the policy interest rate and adjust monetary accommodation,” Nakagawa told business leaders in Shimonoseki City. “Considering that high uncertainties remain regarding the future course of trade and other policies in each jurisdiction and the impact of these policies, the Bank will make monetary policy decisions as appropriate by continuing to carefully assess data and information as it becomes available.”

She noted firms appear more inclined to raise wages and prices, with expectations for a tight labour market growing. But she warned that if supply-driven price rises outpace wages, households could cut spending, which would weigh on growth.

Nakagawa added that U.S. and European economies could prove stronger than expected if governments respond with expansionary fiscal policies.

"Underlying CPI inflation is expected to increase gradually, alongside the rise in medium- to long-term inflation expectations, since it is projected that a sense of labour shortage will grow as the economic growth rate rises," she said, repeating the BOJ's baseline view on the price outlook. 

"In the second half of the projection period of the July Outlook Report, underlying CPI inflation is likely to be at a level that is generally consistent with the price stability target," she said. 

The remarks confirmed the BOJ’s economic and price outlook has remained unchanged since the July meeting.