Bank of Japan Meeting Minutes Summary

By Leika Kihara

TOKYO (Reuters) – Many Bank of Japan policymakers acknowledged that the economy was showing progress towards conditions necessary for further interest rate increases. However, they decided to pause until uncertainties in global markets diminish, according to minutes from their September meeting.

The nine-member board also discussed improving communication regarding policy intentions, including the potential disclosure of individual members' forecasts on future interest rates.

The minutes captured the ongoing debate within the BOJ, highlighting the balance between positive economic signals and external risks, such as volatile financial markets and global economic uncertainty.

Many members noted a clear increase in wages and emphasized the importance of assessing whether inflation-adjusted wages will stay positive in the long term. A few members reported that companies are gradually passing on rising labor costs, particularly in the services sector, indicating a shift in inflation drivers from import costs to wages.

BOJ Governor Kazuo Ueda stated that sustainable wage increases leading to price hikes for services are prerequisites for considering interest rate hikes.

During the September meeting, the BOJ maintained interest rates at 0.25%, with Ueda indicating no rush to raise borrowing costs due to concerns about a potential U.S. recession, which has caused market jitters and uncertainties.

Some members expressed that the BOJ can afford to analyze the effects of international and market developments, noting that the yen's recent recovery would lessen inflationary pressures from rising import costs. One member suggested delaying rate increases until global uncertainties decrease, while another highlighted the importance of addressing economic downside risks.

Conversely, a third member argued that raising rates could be appropriate even amidst market instability, advocating for a policy target increase to 1% as early as the latter half of fiscal 2025.

In a subsequent October meeting, the BOJ kept its policy unchanged but acknowledged that risks related to the U.S. economy were easing, leaving the possibility of a near-term rate hike open.

A slim majority of economists surveyed by Reuters from October 3-11 predicted that the BOJ would not hike rates this year, although most expect a hike by March.