By Leika Kihara
TOKYO, Aug 10 (Reuters) – Bank of Japan policymakers warned of mounting inflation risks that could require a nimble, faster-than-expected pace of interest rate increases, a summary of opinions at their July meeting showed, boosting the case for a September hike.
The BOJ must heighten vigilance to the risk of underlying inflation overshooting its 2% target as rising import costs from the weak yen and price pressures from strong AI demand add to high fuel costs from the Middle East conflict, many in the board were quoted as saying.
“Given we must pay attention to the risk of an inflation overshoot more than before, the pace of rate hikes could be faster than markets expect,” one member said, according to the summary released on Monday.
Another member said the focus of monetary policy has shifted away from efforts to push up underlying inflation to the BOJ’s target of 2%, towards preventing it from overshooting.
“The risk of waiting is no longer marginal. We must accelerate the pace of adjustment to the degree of monetary accommodation,” the member said, calling for a faster pace of rate hikes. Two other opinions called for “nimbly” raising interest rates to address inflation risks and push the BOJ’s policy rate closer to levels deemed neutral to the economy, according to the summary.
The opinions align with BOJ Governor Kazuo Ueda’s hawkish communication after the central bank’s July meeting, where it kept interest rates steady but signalled a strong chance of a rate hike as soon as September.
(Reporting by Leika Kihara; Editing by Stephen Coates)
