The Bank of Japan should continue raising interest rates, as underlying inflation has now reached a level broadly in line with its 2% price stability target while financial conditions remain accommodative, according to the summary of opinions from its October policy meeting. Policymakers said the central bank should consider its next rate increase when conditions permit, while carefully assessing the economy’s resilience, with particular attention to underlying consumption trends in the context of Japan’s aging and shrinking population.
Some members argued that the BoJ ought to quicken the pace of monetary tightening and move rates closer to a neutral level, noting that firms appear more resilient to higher borrowing costs and that the full effects of previous hikes have yet to be felt. Others, however, called for a more cautious stance, recommending that financial conditions be monitored for several months after each increase. The board left interest rates unchanged at the October meeting in order to evaluate the cumulative impact of earlier rate hikes.
