Minutes from the BoJ’s September policy meeting revealed a deeply divided board, with members debating the pace and timing of future rate hikes. The nine-member board voted to keep the policy rate steady at 0.5%, rejecting calls by two hawkish members who wanted to raise borrowing costs to 0.75%. The discussion centered on balancing the downside risks to growth against persistent inflationary pressures, particularly from elevated food prices.
Some members argued for moving sooner rather than later. One hawkish participant called for raising rates at “somewhat regular intervals”, citing an improving flow of data, including corporate earnings and the Tankan business survey, as valuable indicators to guide normalization. Another member warned that the cost of waiting too long to tighten policy was “gradually increasing,” even if it would allow the BoJ to gain more clarity on the global outlook, especially from the U.S.
However, the majority on agreed it was better to wait for “a little more hard data” before considering another move. They noted that while conditions for tightening were gradually being met, acting now could “surprise the market” and risk destabilizing financial conditions. Some emphasized that as long as inflation expectations remain insufficiently anchored, maintaining accommodative conditions was appropriate to support Japan’s recovery.
Another member highlighted uncertainty surrounding the U.S. slowdown as a key reason to stay cautious, but conceded that, based purely on domestic fundamentals, Japan might soon meet the conditions for another hike.
