The Bank of Japan on Aug. 10 released a summary of board members' opinions from its July monetary policy meeting, showing that borrowing costs may rise faster than markets currently price in. A Cabinet Office representative stressed that appropriate monetary policy supporting price stability is essential for a strong economy, and called for close coordination between the government and the central bank. Several board members said the BOJ's rate-hike pace could outpace market expectations, and that agile adjustment of the policy rate is crucial while monitoring inflation risks. The summary also highlighted the need to normalize monetary policy by lifting the policy rate above the lower bound of the estimated neutral rate range. Board members warned that inflation pressures may become visible from summer onward and that the BOJ must clearly show its resolve to avoid excessive inflation. They also urged faster reduction of monetary support, arguing that the cost of delaying hikes is far from minor.
The Bank of Japan released the summary of board members' opinions from its July monetary policy meeting on Aug. 10.
A Cabinet Office representative said appropriate monetary policy that helps achieve price stability is vital for building a strong economy, and expressed hope that the BOJ would coordinate closely with the government and implement suitable policy.
Several board members said the pace of rate hikes could be faster than the market expects, taking into account Japan's economic, price and financial conditions. They argued that agile and flexible adjustments to the policy interest rate are essential while staying alert to upside inflation risks.
The summary also showed support for normalizing monetary policy by pushing the policy rate above the lower bound of the estimated neutral rate range. Board members said the BOJ must make clear its determination to avoid excessive inflation, given that inflation pressures may emerge from the summer. They added that the central bank needs to accelerate the adjustment of monetary support because the cost of delaying rate hikes is far from negligible.
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