BOJ Discusses Caution on Interest Rate Hike at October Meeting

Forex - According to the meeting minutes released this morning, policymakers at the Bank of Japan agreed in October to continue raising interest rates, provided the economy develops in line with forecasts. However, some emphasized the need for caution due to uncertainties surrounding U.S. economic policy. The discussion highlights how significant overseas economic risks related to the new U.S. administration's policies are for the timing of the BOJ's rate increases.

Even though the October 30-31 meeting took place before Donald Trump’s victory in the presidential election on November 5, BOJ board members cautioned that renewed market volatility and potential major changes in U.S. policy posed fundamental risks to the outlook. According to the minutes, one member mentioned, "We may take time to examine developments in the U.S., including after the presidential election, as we were already expecting to raise rates at a moderate pace."

Despite concerns over external risks, the minutes showed that the board was largely optimistic about domestic economic conditions. The majority of the nine-member board stated that rising wages would support consumption and keep Japan on a path towards sustainably achieving the BOJ's 2% inflation target.