BOJ debates timing of rate hike, some call for nearer move, December summary shows By Reuters
Written by Leika Kihara
TOKYO (Reuters) – Some Bank of Japan policymakers saw an imminent rate hike with one predicting a move in the “near future,” a summary of views at the bank’s December meeting showed, keeping the January window alive. go on foot.
The BOJ kept the interest rate steady at 0.25% at this month’s meeting, a move governor Kazuo Ueda explained as aimed at scrutinizing more information about next year’s wage growth and the clarity of the US administration’s incoming economic policies.
“There is great uncertainty amid discussions on fiscal and monetary policy in Japan and the policy stance of the new US administration’s takeover in early 2025,” one member was quoted as saying in a brief calling for policy maintenance. settled on the December 18-19 meeting.
Another view also expressed concern over the weak profits of small firms in Japan and high uncertainty about the overseas economy, the summary showed on Friday.
But others indicated that the conditions for raising interest rates are already in place.
While stressing the need to monitor uncertainty about the US economy at the moment, one member said the BOJ “is likely to decide to raise the policy interest rate in the near future,” the summary showed.
“Although there is still uncertainty regarding the overseas economies, the Japanese economy is in a position where the standard of accommodation can be adjusted,” said another opinion.
SEPARATE THE PIGEONS
The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has shown readiness to rise again if wages and prices move as expected.
All respondents to a Reuters poll taken earlier this month expected the BOJ to raise rates to 0.50% by the end of March. The BOJ next meets to review policy on Jan. 23-24.
While the briefing was closely watched by markets for any hint of a January rate hike, the nine-member board appeared divided between those keen to work soon, and others worried about slow wage growth and soft overseas demand.
A member of the hawkish camp said the BOJ should raise rates in a “forward-looking, timely and gradual manner” as risks to rates have turned to the upside, the summary showed.
Another view is that the BOJ should raise rates in a preemptive manner as a resurgence in import prices, driven largely by a weak yen, is likely to accelerate inflation further.
At the October meeting, board member Naoki Tamura unsuccessfully proposed raising interest rates to 0.5%.
Among the pigeons, another member said that there is no need to increase the rates now that the cost of imports is stable and the growth of wages has not yet reached the pace of inflation.
“It will take time for wage increases to increase utility prices,” because of soft consumption, another view pointed out.
Japan’s economy grew 1.2% annually in the three months to September, down from 2.2% in the previous quarter, while consumption rose 0.7%.
BOJ policymakers are hopeful that average workers’ compensation, which has recently increased at an annual pace of 2.5% to 3%, continues to grow and support consumption.
There are growing signs that companies are willing to continue to lead the way in the face of increasing labor shortages. But slowing demand in China and uncertainty about the policies of president-elect Donald Trump could weigh on the companies’ profits.
The BOJ’s report on the region’s economy, which is expected on Jan. 9, will provide clues as to whether wage increases are expanding and taking root among small firms.
BOJ Vice Governor Ryozo Himino will also deliver a speech and hold a press conference on Jan. 14, which could give some hints that the bank will raise rates next month.
