BOJ debated need for caution in rate hikes, Sept summary shows
Proponent of more hikes said tightening can wait
Now is time to monitor overseas, market moves, one member said
Yen's rebound, stock fall could hurt profits, sentiment
Dovish debate reduces chance of Oct rate hike
Adds detail from summary, background on BOJ policy
By Leika Kihara
TOKYO, Oct 1 (Reuters) -Bank of Japan policymakers discussed the need for caution over near-term interest rate hikes with some voicing concern over unstable financial markets and the U.S. economic outlook, a summary of their September meeting showed on Tuesday.
Even a proponent of future rate increases called for patience in pulling the trigger, the summary showed, highlighting a dovish shift in the nine-member board that diminishes the chance of a hike in October.
"I remain convinced that if it's confirmed that there will be no major downward revision to our outlook, it's desirable to raise rates without taking too much time," one member was quoted as saying at the September meeting.
"But rate hikes should not be an end in itself," the member said, calling for the need to wait for the "appropriate" timing in pushing up borrowing costs.
Given economic and market uncertainties, it was undesirable for the BOJ to raise rates further at this point as doing so might suggest the central bank was shifting to a full-fledged monetary tightening cycle, another opinion showed.
"Overseas economic uncertainties have heightened. We should scrutinise overseas and market developments closely for the time being," a third opinion showed, adding that rate hikes can wait until such uncertainties diminish.
At the September meeting, the BOJ kept short-term rates steady at 0.25% and its governor said it could afford to spend time eyeing the fallout from global economic uncertainties, signalling it was in no rush to raise borrowing costs further.
The BOJ next meets for a rate review on Oct. 30-31, when the board also releases fresh quarterly growth and price forecasts that will be crucial to the bank's long-term policy path.
"In conducting monetary policy, it's necessary to give due consideration to downside risks to Japan's economy and monitor data carefully," a fourth opinion showed, highlighting how the BOJ's focus was shifting away from the risk of an inflation overshoot towards underpinning a fragile recovery.
The BOJ ended negative rates in March and raised short-term borrowing costs to 0.25% in July on the view Japan was making progress towards durably achieving its 2% inflation target.
The BOJ's rate hike in July and Governor Kazuo Ueda's hawkish comments, coupled with weak U.S. labour market data, triggered a spike in the yen and stock market rout in early August. Since then, BOJ policymakers have stressed the need to take into account the economic fallout from market volatility.
The BOJ's Sept. 19-20 policy meeting came a day after the U.S. Federal Reserve's decision to deliver an oversized reduction in borrowing costs.
The departure of Prime Minister Fumio Kishida, who appointed Ueda and nodded to the BOJ's policy normalisation, adds to uncertainty over the bank's efforts to push up interest rates to levels deemed neutral to the economy - which one board member said was at least 1%.
At the September meeting, one member said the yen's sharp reversal from past weaknesses could hurt exports and discourage manufacturers from raising wages, the summary showed.
"Uncertainties have heightened about the U.S. economy and the pace of rate cuts by the Fed. Attention needs to be paid to the possibility that these factors will have a negative impact on the yen's exchange rates and corporate profits in Japan," another opinion showed.
"As for the next rate hike, I'm focusing on developments in consumer inflation, momentum toward next year's wage talks and U.S. economic developments," a separate opinion showed.
Reporting by Leika Kihara; Editing by Jacqueline Wong and Sam Holmes
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
