Minutes from the Bank of Japan’s June meeting highlighted growing concern about inflation risks. Most board members judged that higher crude oil prices were rapidly feeding through into business transactions and increasingly reflected in consumer prices. Several warned that underlying inflation could overshoot the 2% target, with fuel costs intensifying existing pressures from a weaker yen and a tight labor market.
Some policymakers anticipated that consumer inflation would pick up in the second half of the year as companies roll out broad-based price increases. One member cautioned that even if tensions in the Middle East ease and oil prices decline, elevated shipping and storage costs for alternative energy sources would continue to exert upward pressure on inflation.
The minutes also revealed that two members backed a quicker pace of rate hikes to bring policy closer to a neutral stance, pointing to firms’ increased readiness to pass on costs through higher prices. The BoJ raised its policy rate to 1.0% in June but left it unchanged in July, while indicating that persistent upside risks to inflation could warrant another hike as early as September.
