BOJ Rate Hike Debate Intensifies: Some Members Eye Near-Term Move

The Bank of Japan's December meeting revealed a division of opinion concerning the timing of a potential interest rate hike, as reported by Reuters, citing minutes released by the bank. Some members suggested a near-term move is warranted, even as the BOJ ultimately held steady at 0.25%.

The BOJ's decision to maintain its current interest rate was attributed by Governor Kazuo Ueda to the need for more data on wage momentum and clarity on the incoming US administration's economic policies. However, the minutes highlight that several members expressed different perspectives.

"There are high uncertainties over the course of discussions on tax and fiscal policy in Japan and over the policy stance of the new U.S. administration taking office at the beginning of 2025," one member stated, according to Reuters, in support of maintaining the current policy.

Other members expressed concerns about the weak profitability of smaller Japanese firms and uncertainty in the global economy. Yet, countervailing opinions within the board emphasized that conditions for a rate increase were developing.

Despite acknowledging uncertainty surrounding the US economy, one member predicted a rate hike "in the near future," Reuters reported. Another opinion indicated that Japan's economy had reached a point where monetary easing could be adjusted.

The BOJ ended negative interest rates in March and raised its short-term policy target to 0.25% in July, signaling its willingness to increase rates further if wage and price growth align with projections. A Reuters poll conducted earlier this month indicated that most economists expect the BOJ to raise rates to 0.50% by the end of March. The BOJ's next policy meeting is scheduled for January 23-24.