During its June meeting, the Bank of Japan discussed the possibility of a recent rate hike, with one policymaker urging "not to delay too long" to address the risk of inflation exceeding expectations. The meeting summary released on Monday revealed this discussion.
This discussion highlights the board's growing awareness of the increasing inflationary pressures on the world's fourth-largest economy, which might prompt the Bank of Japan to discuss a rate hike at its next policy meeting on July 30-31.
The recent depreciation of the yen has increased the possibility that the Bank of Japan will raise its inflation expectations, implying that the appropriate policy rate level might be raised, as one member noted during the June 13-14 policy meeting.
Another member stated: "The Bank of Japan must continue to closely monitor data up to the next policy meeting, as the risks of rising prices have become 'more significant.' If deemed appropriate, the Bank of Japan should raise the policy rate 'without too much delay.'"
A third member pointed out that the central bank must consider whether further rate hikes are necessary, as inflation could exceed expectations if companies continue to pass on recent cost increases.
However, some of the nine board members were more cautious about a recent rate hike, arguing that it is necessary to carefully examine whether wage increases will boost consumption, according to the meeting summary.
Ryutaro Kono, Chief Japan Economist at BNP Paribas, wrote in a research report: "The risk of a rate hike by the Bank of Japan in July may be higher than initially thought." He added that if yen depreciation accelerates, the central bank might take action next month.
