BOJ mulls near-term rate hike

The Bank of Japan (BOJ) discussed raising interest rates soon due to concerns about increasing inflation, a June meeting minutes showed on Monday.

The board was concerned about rising inflation, which has exceeded the target of two per cent for two consecutive years, reaching 2.5 per cent in May. Some members suggest raising the policy rate promptly to prevent further inflationary pressures.

The recent decline in the yen has raised the possibility that the BOJ may need to revise its inflation forecasts upwards. This could lead to an adjustment of the appropriate policy rate level.

Despite the growing hawkish sentiment, some members remain cautious. They emphasise the need to assess whether rising wages will translate into increased consumer spending.

The minute’s hawkish tone pushed the benchmark 10-year Japanese government bond (JGB) yield to its highest level since June 12th at 0.995 per cent on Monday.

In June, the BOJ opted to maintain short-term interest rates at 0-0.1 per cent. However, they signalled a move towards policy normalisation by announcing plans to detail a strategy for reducing their $5 trillion balance sheet next month.

Attribution: Reuters