Minutes from the Bank of Japan's (BOJ) July meeting revealed a split among policymakers regarding the pace of future interest rate hikes, underscoring uncertainty about the timing of the next increase. In a surprise move, the BOJ raised short-term interest rates to 0.25 per cent in July with a 7-2 vote, signalling a gradual shift away from a decade of extensive stimulus measures. While at least two board members advocated for further rate hikes. One member emphasised the importance of avoiding excessive market expectations for future rate hikes, given that inflation expectations have yet to be anchored at the BOJ's two per cent target. Another member warned against normalising monetary policy too rapidly, stressing the need to monitor various risks and move cautiously. The comments highlight the difficulty BOJ Governor Kazuo Ueda faces in raising interest rates to a neutral level. One member mentioned the challenges of determining Japan's neutral rate due to high uncertainties. The member suggested that the BOJ should adjust policy rates based on economic and price responses to changes in short-term rates. Attribution: Reuters Subediting: M. S. Salama
