BoJ Summary Shows Board Discussed Possibility Of Early Rate Hike

The board of the Bank of Japan discussed the chance of an early rate hike as there is rising upside risks to prices, according to the summary of opinions at the monetary policy meeting on June 13 and 14.

“…there is a possibility that prices will deviate upward from the baseline scenario if another pass-through of recent cost increases to consumer prices happens,” the summary said.

Therefore, it is necessary for the bank to consider whether further adjustments to monetary accommodation are needed from the perspective of risk management.

One member said it should raise the policy rate not too late, in response to an increase in the likelihood of achieving the target.

Members observed that the weakness of the yen raises the possibility of an upward revision to the outlook for the inflation rate.

“From the standpoint of the risk-management approach, the appropriate, risk-neutral level of the policy interest rate should rise in reflection of the increased upside risks to prices,” the summary said.

At the June meeting, the BoJ delayed its normalization of policy as policymakers decided to unveil a detailed plan for reducing its bond purchase programme at its upcoming meeting in July.

The BoJ said it will decide on a detailed plan for the reduction of its purchase amount during the next one to two years or so. Further, the board unanimously decided to maintain the uncollateralized overnight call rate to remain at around 0 to 0.1 percent.

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