BOJ policymaker urged faster rate hikes on inflation risks in July meeting

In July's Bank of Japan policymaker meeting, a member advocated for the central bank to expedite interest rate increases due to price inflation risks, according to a July 31 summary. The July 30-31 meeting left the benchmark policy rate unchanged, after a 31-year high of 1.0 percent hike in June. The member argued that accelerating monetary adjustment was necessary if upside price risks emerged, fearing a double shock to Japan's economy and citizens.

Another member suggested that policy rate hikes could outpace market expectations due to heightened concerns over price risks. While analysts had anticipated quarterly rate hikes, some now believe a September increase is more likely, following the Bank's joint yen-buying intervention with U.S. authorities on July 31 to support the yen's weakening against the U.S. dollar.

Despite inflation worries stemming from factors like AI demand growth and the yen's depreciation, concerns over economic slowdown due to Middle East conflict and higher oil prices have diminished. This shift indicates the bank may now view the negative impact of rate hikes on the economy, such as increased borrowing costs for businesses and households, as less likely.