MNI BRIEF: BOJ's Noguchi Calls For Measured Rate Hikes

The Bank of Japan will adjust its policy interest rate cautiously and in stages to ensure inflation stabilises around 2%, noting the path forward will depend on underlying economic trends, board member Asahi Noguchi told business leaders in Miyazaki City Thursday.

“In doing so, I believe it is crucial that the Bank take a measured, step-by-step approach as follows,” Noguchi said, declining to specify the timing or scale of future hikes.

He emphasised that each policy rate increase should be followed by a thorough review of economic conditions. “The Bank takes sufficient time to examine the economic impact of the rate hike each time it raises the policy interest rate; the Bank then decides on the next policy rate hike after adequately assessing both upside and downside risks at each point in time,” he said.

Noguchi, seen as a dovish board member, pushed back on the notion of pre-determined policy endpoints. “This implies that the terminal policy rate, which corresponds to the peak level of the policy interest rate, should not be determined in advance based on factors such as the estimated neutral interest rate,” he noted.

“Given that Japan's economy has experienced deflationary trends over a few decades, these estimates are only useful in providing a rough figure for the terminal policy rate, which can only be measured based on the economic situation at the time, particularly price developments."

He urged policymakers to maintain “cautious optimism,” balancing vigilance on external risks with a calm assessment of domestic conditions.