The summary of the opinions at the Bank of Japan's meeting on July 31 shows that officials expect monetary policy to continue to be accommodative, and even if they raise interest rates, they do not believe that this move is sufficient to disrupt global markets.

At last month's meeting, the Bank of Japan raised its benchmark interest rate to 0.25% and announced a plan to halve the monthly pace of bond purchases by the first quarter of 2026. After the meeting, Bank of Japan Governor Haruhiko Kuroda said that if economic growth and inflation trends meet their forecasts, the Bank of Japan will further raise interest rates. According to media reports, this led some analysts to believe that this statement was hawkish.

According to the summary released on Thursday, one of the nine members of the board of directors said:

"It should be noted that raising interest rates at a moderate pace means adjusting the degree of monetary easing in accordance with underlying inflation, which will not produce a monetary tightening effect."

After the July meeting, due to expectations that the Bank of Japan will further raise interest rates and the Fed may cut interest rates, the Japanese stock market experienced its worst crash since 1987, and the yen soared. In order to reassure investors, Deputy Governor Masayoshi Amamiya said on Wednesday that the Bank of Japan will not raise interest rates when the financial market is unstable, which boosted the stock market and caused the yen to weaken.

"Another official emphasized that even after raising interest rates, the real interest rate will still be far below the neutral interest rate, indicating that the continuity of overall policy can be maintained. "Since the neutral interest rate level seems to be at least around 1%, banks need to raise policy rates timely and gradually to avoid rapid increase of policy rates," one official said.

"Another official said, "Japan's economic activity and prices are developing in line with the Bank of Japan's expectations. The year-on-year change rate of import prices has turned positive again, and price upside risks need to be watched. Therefore, from the perspective of achieving price stability in a sustainable and stable manner, it is appropriate for the Bank of Japan to raise policy rates and adjust the degree of monetary easing."

Japanese Finance Minister Taro Aso said at a news conference on Thursday that various factors are driving market volatility, and algorithmic trading cannot be ruled out as a potential factor in recent turbulence in the Japanese stock market.

"Authorities are closely monitoring these fluctuations, but it's not yet at the stage where any specific measures will be taken," Aso said.

Taro Aso also expressed support for the Bank of Japan, saying that the Bank of Japan should decide on specific steps related to monetary policy.

In the Bank of Japan's summary of opinions, some officials called for a cautious approach to interest rate policy in view of the still-fragile economy. The vote for raising interest rates was 7 to 2, and board members Tomoyuki Nagashima and Asahi Noguchi voted against. The summary did not disclose which board member expressed which opinion.

"The summary shows:"

"One member said it was necessary to assess more carefully whether the economic situation had improved through broad-based wage growth, as many indicators show signs of weakness, such as economic growth and private consumption."

"Another member opposed the rate hike due to weak economic indicators. "One member said there isn't much data to support sustainable economic growth in Japan. Therefore, I am against raising the policy rate."

Regarding the plan to cut the Bank of Japan's monthly purchases of sovereign debt, one member said that normalizing the bank's balance sheet will take a long time, and the side effects of holding a large amount of bonds may last for a long time.

Editor/Somer