The Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Thursday, per the BoJ Minutes of the June meeting.
Most members agreed economy progressing as baseline, risks persist inflation could exceed 2% target.
One member noted FX factors are driving import prices higher, impacting smaller companies.
One member said Japan’s real interest rate is unusually low by global standards, must be adjusted given inflation upside risks.
One member said moving BOJ’s policy rate closer to neutral would support economic, price stability over time.
Members agreed it was suitable for Bank of Japan to keep raising rates.
Some members stress BOJ should uphold guidance to continue raising rates if economy, prices align with projections.
One member urges moving policy rate closer to neutral promptly.
One member said central bank must increase rates about once every few months.
Some members said decision to pause bond taper was to prevent market instability, not to respond to fiscal policy.
One member emphasized the importance of gradually shrinking BOJ’s balance sheet.
One member said central bank must eventually pursue suitable reserve level considering economic and financial developments.
Some members say debate on bond taper centers on size, but focus will likely move to duration of JGB purchases.
Cabinet Office official says BoJ must act to stabilize market, review impact of shrinking balance sheet on economy over bond purchases.
Cabinet Office representative hopes BOJ guides suitable policy considering government efforts to enhance crisis management and growth-area investment.
One member said medium- to long-term inflation expectations start shifting as market break-even inflation rate rises above 2%.
One member notes inflation expectations of firms, households have risen to about 2%.
Some members say consumer inflation set to rise significantly due to growing price hikes in second half of fiscal year.
Many members said central bank must be more attentive than before to upside price risks.
Several members said the likelihood of Japan experiencing wages, inflation escalating significantly was low.
One member noted Japan may experience inflation pass-through to wages.
At the time of writing, USD/JPY is down 0.04% on the day at 157.65.
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