BOJ board member Masu Kazuyuki (増一行) said ahead of next week’s monetary policy meeting that the Bank would closely examine developments in the yen and commodity markets and deepen its discussion. He did not, however, state whether a rate hike would be appropriate, while markets are pricing in the possibility of a hike at the next meeting.
BOJ board member Masu Kazuyuki (増一行) said that there was currently no clear indication that the underlying inflation rate was rising substantially above 2%, and expressed the view that the economy was not in an environment requiring a major 0.5% rate hike. He also referred to the estimated neutral interest rate range of 1.1–2.5% and noted that the policy rate was currently below its lower bound.
However, he said the exact level of the neutral interest rate was unknown, and responded that it remained uncertain whether monetary policy would be accommodative even if the policy rate reached 1.25%. Ahead of next week’s meeting, he indicated that discussions would continue without stating whether a rate hike would be appropriate.
At the press conference, he also referred to the fact that markets were increasingly pricing in the possibility of a rate hike at next week’s meeting, and said the Bank would “closely inspect and thoroughly assess” factors such as further yen appreciation and rising commodity prices before discussing them at the next meeting.
Markets are reported to have almost fully priced in a rate hike at next week’s meeting, while expectations are also building for an additional rate hike in December.