BOJ eyes more rate hikes amid US concerns

The Bank of Japan (BOJ) policymakers agreed in October 2024 to continue raising interest rates if the economy progresses as expected, but some emphasised the need for caution due to uncertainty surrounding US economic policy.

The debate underscores the importance of international economic risks, especially those related to the new US administration’s policies, in determining when the BOJ will raise interest rates, according to meeting minutes released on Tuesday.

The Oct. 30-31 meeting occurred before Donald Trump’s election win on Nov. 5. BOJ board members cautioned about increased market volatility and potential US policy changes as major risks, according to the minutes.

“We can spend time scrutinising US developments, including those after the US presidential election, as we had already been expecting to raise rates at a moderate pace,” one of the members was quoted as saying in the minutes.

The board was optimistic about domestic economic conditions, with many members believing that higher wages would support consumption and help Japan reach the BOJ’s two per cent inflation target.

The BOJ kept interest rates unchanged at 0.25 per cent during the October meeting but forecasted inflation to fluctuate around its two per cent goal in the upcoming years, indicating that it was likely to raise borrowing costs soon.

Attribution: Reuters

Subediting: M. S. Salama