Several Bank of Japan policy board members referred to the need to accelerate the pace of rate hikes at the BOJ's July meeting, according to information that has emerged. As underlying inflation approaches 2%, some of the views made public suggested that an early move may be warranted.
The BOJ held its policy meeting on 30 and 31 July, where a majority voted to keep the policy rate at around 1%. While market expectations have spread for rate hikes at a pace of roughly once every six months, including at the next meeting, several comments following the meeting also suggested that a rate hike could come sooner.
Some members said that, as the underlying rate of inflation approaches 2%, it is necessary to give greater consideration than before to the risk of inflation exceeding expectations. They also referred to the possibility that the pace of rate hikes could be faster than markets expect, depending on economic, price and financial conditions.
The Outlook for Economic Activity and Prices report released alongside the decision included the view that expanding AI-related demand and foreign-exchange movements, including the weaker yen, could affect the conduct of monetary policy, and positioned them as factors influencing price trends.
Market expectations are also shifting, with expectations for a rate hike at the September meeting rising and attention focused on developments ahead. The importance of responding flexibly to financial conditions overseas was also emphasized.