On June 14, after the Bank of Japan's monetary policy meeting, Governor Haruhiko Kuroda revealed an important information that the Bank of Japan may significantly reduce its purchases of bonds after the July interest rate meeting.

This information has drawn strong attention to the July interest rate meeting, and there is a premonition that this meeting will be a turning point for the Bank of Japan's monetary policy.

This Monday, according to the latest summary of the June policy meeting released by the Bank of Japan, the Bank of Japan's committee members not only discussed the reduction of bond buying, but also discussed "rate hikes," which will make the July interest rate meeting more mysterious.

Is it possible that the Bank of Japan will raise interest rates?

On June 14, the Bank of Japan announced that it will continue to maintain its policy interest rate at the level of 0-0.1%. Governor Kuroda then revealed that the Bank of Japan will gradually reduce the scale of bond purchases, with specific plans to be implemented immediately after the next policy meeting.

Kuroda hinted at the time that the reduction in bond purchases this time would be "considerable." The Bank of Japan will hold a bond market participant meeting from July 9th to 10th to solicit opinions on its plan to purchase government bonds. Yuji Matsuo, senior market economist at Mizuho Securities, speculated that the Bank of Japan may reduce its monthly purchase of Japanese government bonds by more than 1 trillion yen.

This news has led the market to generally lower its bets on a rate hike by the Bank of Japan in July. It is because most people believe that the Bank of Japan may not raise interest rates in the short term as it shrinks its bond purchases, because the Bank of Japan is unlikely to implement two major policy adjustments simultaneously in the short term.

However, the latest released summary of the June meeting may have ignited a glimmer of hope for a rate hike in July.

According to the latest summary of the June policy meeting released by the Bank of Japan, Japanese central bank officials did indeed discuss the possibility of rate hikes at the June meeting. The summary showed that Bank of Japan officials believe that with the upward risk of Japanese inflation becoming "more apparent," central bank officials are considering the option of raising interest rates.

"The Bank of Japan needs to continue to closely monitor relevant data and prepare for the next monetary policy meeting," said one of the nine members of the council. "If appropriate, the central bank should raise the policy rate before it is too late."

The summary also shows that a Bank of Japan committee member said at the June meeting: "If the recent cost increases are again transmitted to consumer prices, prices may deviate from the benchmark scenario... Therefore, the central bank must consider further adjustments to its loose monetary policy from a risk management perspective."

This summary suggests that there is still a possibility of a rate hike at the Bank of Japan's July 30-31 interest rate meeting.

Last week, when asked if action was possible in July, Bank of Japan Governor Haruhiko Kuroda expressed the same idea in relatively strong terms: "Of course." He added that a rate hike could be possible as long as the data allows for it.

However, some analysts are not convinced.

However, some analysts have not been convinced by this summary of the meeting minutes. They still expect that the Bank of Japan will not raise interest rates next month, and believe that the hawkish comments of the Bank of Japan are only to support the yen.

On Monday morning, the USD/JPY exchange rate remained near the key level of 160 yen, making foreign exchange traders vigilant about possible government intervention.

In addition, the summary also reflects that some committee members are cautious about raising interest rates. The main reason behind this is that private consumption in Japan lacks momentum, and the recent safety scandals in the Japanese auto industry have caused the Japanese economy to shrink in the quarter.

Recently, the Japanese Ministry of Land, Infrastructure, Transport and Tourism reported that 38 models of 5 car companies, Toyota, Mazda, Yamaha Motors, Honda, and Suzuki, in the certification process of mass production, had violations such as falsifying collision data, cheating engine power tests, and falsifying brake test results. This scandal has caused many Japanese car models to be suspended for delivery, and car companies and related enterprises are facing huge economic losses.

"While private consumption in Japan lack motivation, some automakers have unexpectedly suspended deliveries... As the central bank needs to evaluate the impact of these factors, it is appropriate to continue the current loose monetary policy for the time being," said a Bank of Japan committee member.

Editor/Somer