The Bank of Japan published the minutes of its September policy meeting on Thursday. Board members agreed it was suitable to keep increasing the policy interest rate and to modify the level of monetary easing. Their views on timing, however, varied considerably across the board.
Views on the pace of tightening
One member said it was preferable to move the policy rate closer to the target relatively soon. The same member wanted to keep flexibility for quick adjustments in either direction. Another said the bank needed to show markets its resolve to prevent upward price deviations. Rate hikes would have to speed up if signs of rising price deviation appeared. Another member argued the bank did not need hasty action. Policy should aim to prevent excessive, persistent inflation.
Inflation and the neutral rate
Members said services prices had risen steadily over recent years. Underlying inflation could rise if that trend accelerates. One member said the current CPI increase had largely met the price stability target. Another said underlying CPI inflation had already reached a level generally aligned with the 2 percent target. Several members highlighted a rising chance of CPI inflation increasing from early autumn. Many members said it was difficult to pinpoint the neutral rate level in advance.
Government comments
A Cabinet Office representative said the BoJ may need to consider its estimates of the neutral interest rate. The Ministry of Finance expects the central bank to carefully assess how shifts in the policy rate affect the economy and prices. In late trading, USD/JPY was down 0.03 percent on the day at 158.39, as of the time of writing.
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Source: Bank of Japan
