Source: Finance Association
① The minutes of the Bank of Japan's April policy meeting show that several members of the Bank of Japan called for the need to raise interest rates steadily to prevent the risk of inflation exceeding; ② At the meeting, the Bank of Japan gave a forecast that future inflation will remain at around 2%; ③ some members pointed out that as the possibility of achieving the forecast increases, interest rates must be raised at the right time, and the rate hike path may be faster than expected.
The minutes of the Bank of Japan's April policy meeting showed that the positions of the members of the central bank committee clearly “turned hawk” at the meeting. Many members called for the need to raise interest rates steadily to prevent the risk of overinflation.
The attitude of officials on the interest rate path also echoes the latest remarks made by Bank of Japan Governor Kazuo Ueda. Recently, Ueda has pointed out many times that the yen trend will have a major impact on inflation, and has hinted that interest rates may be raised many times in the future, strengthening the possibility that short-term borrowing costs will rise in the next few months.
Raise interest rates at the right time
The Bank of Japan kept interest rates in the 0-0.1% range during the April 25-26 meeting. Furthermore, the central bank has not decided to change the bond purchase plan, saying it will continue to buy bonds in accordance with the March decision.
According to the minutes of the April meeting released on Thursday (May 9), the Central Bank Committee expects Japan's potential inflation to gradually rise, medium- to long-term inflation expectations will rise as the virtuous cycle between wages and prices continues to strengthen, and future inflation will remain around 2%.
Recently, however, the depreciation of the yen combined with the rise in prices (such as the rise in crude oil prices) has begun to push up import prices, which in turn affects producer prices.
Considering these factors, the market is beginning to pay more attention to whether the current trend of slowing commodity price increases will begin to reverse, and whether service prices will rise along with rising wages.
Faced with potential inflation, a member of the conference said that the Bank of Japan should consider raising interest rates moderately to avoid having to raise interest rates “intermittently and quickly” once its price target continues to be achieved.
Another voice also stated, “The Bank of Japan must raise interest rates in a timely and appropriate manner, as the probability of meeting its growth and price expectations increases.”
Another committee member believes that the rate hike path is likely to be faster than expected. “If the outlook expectations shown in our April quarterly report are met, then our 2% inflation target will continue to be achieved steadily over about two years, and the output gap will be positive (demand is greater than supply). As a result, our subsequent policy interest rate will likely be higher than the current market pricing path.”
According to the minutes, another member pointed out that the Bank of Japan at some point hinted that it was appropriate to reduce the path of bond purchases.
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