BoJ Summary of Opinions from its December 18–19 meeting revealed a divided board on the timing of monetary policy normalization. While some members advocated for action soon, citing upside risks to prices, others expressed caution due to slow wage growth, soft overseas demand, and heightened uncertainties.
One member emphasized that with economic activity and prices aligning with BoJ’s outlook, risks to inflation were becoming “skewed to the upside.” The member argued for a “forward-looking, timely, and gradual” adjustment of monetary policy. Similarly, another member noted that the sustained increase in prices over the past three years, partly driven by Yen’s depreciation, would likely contribute to higher underlying inflation, warranting “preemptive” rate hikes.
Conversely, more dovish members maintained that the current risks to prices “do not suggest a pressing need” for rate hike. One member cited uncertainties surrounding tax and fiscal policies in Japan and the stance of the incoming US administration as reasons to maintain the current policy stance, emphasizing a risk management approach.
Overall, the BoJ board appears focused on assessing the outcomes of next year’s spring wage negotiations and the impact of US policy shifts before making further moves toward policy normalization.
