Bank of Japan saw growing case for near-term hike — summary

TOKYO — Bank of Japan (BoJ) policymakers saw a growing case to raise interest rates in the near term, with some calling for the need to ensure companies’ wage-hike momentum will be sustained, a summary of opinions at the October meeting showed on Monday.

Of the 13 opinions on monetary policy from the nine-member board, eight called for the need to raise interest rates soon or laid out specific conditions to hike borrowing costs in the near-term horizon, the summary showed.

The discussions heighten the chance the BoJ could hike rates next month or in January, with the timing dependent on whether earnings and comments from executives give policymakers enough conviction that firms will keep increasing pay next year.

“While the current situation may not require immediate action, the bank should not miss the timing to raise the policy interest rate,” one member was quoted as saying in the summary.

The BoJ is likely to raise rates if there is “no negative news” regarding the global economy or markets, and if it can confirm that firms’ active wage-setting behavior will be maintained, another opinion showed.

“It is likely that conditions for taking a further step toward normalizing the policy rate have almost been met. But the Bank needs to examine to what extent the underlying inflation rate has become entrenched,” a third opinion showed.

At the two-day meeting through Oct. 30, the BoJ kept interest rates steady at 0.5%. Two board members, Naoki Tamura and Hajime Takata, dissented to the decision and instead proposed hiking rates to 0.75%.

In a news briefing after the meeting, BoJ Governor Kazuo Ueda said he wanted to await “a bit more data” to confirm whether companies will keep raising wages despite pressure from higher US tariffs.

BoJ board member Junko Nakagawa offered few hints on the timing of the next rate hike in a speech on Monday, but warned of soft consumption and concern over the US economic outlook.

While the BoJ will continue to raise interest rates, it will carefully scrutinize data given “high uncertainties” surrounding the impact of US trade policy, she said.

The summary showed several opinions pointing to the fallout from higher US tariffs and Japanese companies’ wage momentum as key factors in deciding the timing of the next rate hike.

One member said the BoJ needs to take “a little more time” to examine the economic situation due to uncertainty over US tariffs and the economic policy of Japan’s new administration.

Another said raising the policy rate now would be part of a process of normalization that would help curb economic distortions for the future.

The BoJ ended a decade-long, massive stimulus last year and raised short-term rates to 0.5% in January on the view Japan was on the cusp of durably achieving its 2% inflation target.

While Mr. Ueda has signaled his readiness to raise rates further, the BoJ faces political challenges after Prime Minister Sanae Takaichi, an advocate of expansionary fiscal and monetary policy, became the nation’s prime minister last month.

Underscoring her preference for loose monetary policy, the Ms. Takaichi administration will urge the BoJ to focus on achieving strong economic growth accompanied by stable prices in an outline of its stimulus package, a draft seen by Reuters showed.

A majority of economists polled by Reuters last month forecast the BoJ will raise interest rates in the current quarter with nearly 96% of them expecting a hike by end-March. — Reuters