The Bank of Japan's summary of opinions from its September 17 and 18 meeting, embargoed until 8:50 a.m. Japan time on Thursday, October 1, shows opinions differing over how close underlying inflation is to target and over whether to raise the rate at that meeting. The opinions add the arguments behind the meeting's rate decision. They are anonymous and edited by the governor as chairman, so they cannot be read as a tally or as a policy announcement.
Underlying inflation: three readings
One opinion says underlying CPI inflation "has generally reached 2 percent" and that price developments since the previous meeting have supported that view. Another is more cautious: the relevant indicators are mixed, with some above 2 percent and others below, so it is difficult to conclude whether the level has been reached. That opinion proposes premising the discussion on inflation being around 2 percent and focusing on how to anchor it there. A third expects underlying inflation to reach 2 percent before long and sees no need for hasty action.
The document separates these assessments from the broader CPI. One opinion notes that both the CPI (all items less fresh food) and the CPI (all items less fresh food and energy) have stayed in a range of 1.5-2.0 percent recently, partly reflecting government measures.
The case for raising
The hiking opinions rest on three points: economic and price developments are largely on track; the Middle East situation, AI-related demand and exchange rates still warrant attention as factors that could push up prices; and financial conditions show no significant change since the previous hike and look accommodative. One opinion adds that a hike at this meeting would come three months after June's, a shorter interval than before, because the economy has been more resilient than expected.
Some opinions look past this meeting. One says a shift in the phase of policy is under way, from encouraging a rise in underlying inflation to preventing an upward deviation. Another says the Bank should accelerate the pace of hikes if signs of an upward deviation appear. A third warns the neutral interest rate could deviate upward from prior estimates and urges assessing accommodation after each hike rather than assuming a level in advance.
The case for holding
One opinion argues that the year-on-year rise in the CPI has been below 2 percent and that the economy cannot necessarily be called strong, so keeping the current rate was desirable. Another says current economic and price developments have not substantially accelerated, making a hike inappropriate at this time.
Other opinions in the prices section make observations on the economy without stating a recommendation: the pace of increase in services prices appears more or less unchanged recently, and private consumption has remained subdued.
An opinion on economic developments adds that April-June real GDP growth was positive, but domestic demand was negative and the positive external contribution reflected lower imports from Middle East supply constraints, so the economy is not growing in a strong and sound manner.
The government's position
The Ministry of Finance expects the Bank to decide appropriately and explain its intent carefully to markets. The Cabinet Office asks the Bank to examine the cumulative effects of past hikes and says it may need to consider its neutral-rate estimates. Both expect the Bank to work closely with the government toward the 2 percent target.
The document does not say who expressed which view.