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BOJ record signals consensus that inflation is faster than expected
Bank of Japan board members discussed inflation running at a faster pace than expected while they continued to see the need for vigilance over high uncertainties related to U.S. tariffs, according to a summary of opinions from their policy meeting last week.
"Even though prices have been somewhat higher than expected, it is appropriate for the bank to maintain its current stance regarding the conduct of monetary policy, given the downside risks to economic activity stemming from U.S. tariff policy and the situation in the Middle East,' one of nine board members said, according to a brief record of the June 16-17 meeting released Wednesday.
Others also referred to inflation running at a higher rate than expected.
While the summary suggests little urgency to hike rates for now, the common views on inflation raise the possibility the board could hike the benchmark rate if uncertainty pertaining to the tariff impact starts to clear up.
The record of the meeting follows data Friday showing Japan's key price gauge hit a fresh two-year high, and the board's inflation views indicate it's possible the bank will raise its inflation forecast in a quarterly economic report at the July meeting.
Gov. Kazuo Ueda's board kept its benchmark rate unchanged at 0.5% at the gathering while it unveiled a plan to taper its bond purchases at a slower pace from next fiscal year. At his post-meeting news conference, Ueda stressed the need for watching the impact of U.S. tariff measures in economic data before mulling another rate hike.
"The bank should, at this point, maintain accommodative financial conditions with the current interest rate level and thereby firmly support the economy,' one member said, the summary showed. The summary doesn't say which member made comments.
The BOJ's recent communications have supported widely held market expectations there won't be a rate hike when the board next sets policy on July 31.
One opinion that showed a clear hawkish tilt likely came from the most hawkish member Naoki Tamura. Tamura voted against the BOJ's decision to taper bond buying more slowly, as he said longterm rates should be left to the market.
"With inflation being at levels higher than expected, the Bank may face a situation where it should adjust the degree of monetary accommodation decisively, even when there is high uncertainty,' one member said.
