Bank of Japan board member Toichiro Asada said he would only support another interest rate hike once inflation is clearly being driven by stronger domestic demand rather than temporary cost pressures. Speaking after dissenting against the BoJ’s June rate increase, Asada said, “I would support another rate hike only after confirming demand-driven inflation,” signaling that current price gains have yet to meet his threshold for further policy normalization.
Asada argued that inflation generated by higher oil prices and a weaker yen should not be treated the same as inflation supported by rising wages and household spending. While acknowledging that energy prices have passed through to consumer inflation more quickly than expected, he indicated that the BoJ should wait for clearer evidence that wage growth is translating into stronger consumption and sustainably higher prices. He also stressed that monetary policy should respond to evolving economic conditions rather than follow a predetermined tightening path.
The remarks reinforce Asada’s position as the most cautious voice on the BoJ board following last month’s decision to raise the policy rate to 1.00%. He also argued that Japan’s neutral interest rate remains low and supported a gradual normalization of the BoJ’s balance sheet through a measured reduction in bond purchases. His comments highlight that, despite the BoJ’s ongoing normalization process, policymakers remain divided over when inflation can truly be considered durable enough to justify additional rate hikes.
