HomeLive CommentsBoJ deliberates on rate hikes, Yen depreciation, and JGB purchase adjustments

BoJ deliberates on rate hikes, Yen depreciation, and JGB purchase adjustments

During Monetary Policy Meeting on June 13-14, BoJ board discussed the need for adjustments in response to rising inflation risks. One key opinion indicated that if April Outlook Report’s economic and inflation forecasts are realized, BoJ will raise the policy interest rate and adjust monetary accommodation.

Another member warned that prices could “deviate upward” from the baseline scenario if recent cost increases are passed on to consumers, suggesting a need for further policy adjustments from a “risk management” perspective. It’s also highlighted the growing “upside risks” to prices, with one member stating these risks have affected consumer sentiment and that the policy interest rate should be raised “not too late” if appropriate.

The impact of Yen’s depreciation was also discussed, with an opinion suggesting an “upward revision” to the inflation outlook, warranting a higher risk-neutral policy interest rate. Some members emphasized the importance of basing monetary policy on the “overall picture of developments in economic activity and prices,” rather than short-term foreign exchange fluctuations. They stressed that policy should be informed by trends in prices and wage developments.

Regarding asset purchases, one opinion recommended reducing the purchase amount of Japanese government bonds to allow long-term interest rates to form more freely in financial markets. This reduction should be “sizeable” and “predictable,” while ensuring flexibility to maintain stability in JGB market.

Full BoJ Summary of Opinions here.

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