BoJ minutes 🚩USDJPY tries to recover

The minutes from the Bank of Japan’s latest meeting indicated that real interest rates in Japan remain very low, and that a rate hike is possible if supported by data. Below are the key excerpts from the meeting:

• Members agreed that a high level of uncertainty persists regarding trade policy developments and their impact on the economy.

• Several members believed that the current monetary policy stance should be maintained in order to better assess the effects of trade policy changes on the domestic economy, overseas markets, and prices.

• One member stated that the Bank of Japan should support the economy through monetary policy, as growth may temporarily slow due to the impact of US tariffs.

• Another member noted that it would not be too late to take a closer look at hard data before continuing with the process of policy normalization.

• One participant emphasized that conditions for a rate hike are gradually falling into place, though the Bank should avoid surprising markets with an early move.

• Another member suggested that it could be a good time to resume rate hikes, as more than half a year has passed since the last one, though it might be prudent to wait given uncertainty over the extent of the US slowdown.

• One member pointed out the importance of predicting with reasonable certainty—based on corporate profits and preliminary wage negotiation data—that the recent trend of wage increases will not be disrupted.

• Another participant proposed that the BoJ should adjust interest rates at a steady pace, drawing on a wide range of information expected in the near term, including companies’ first-half earnings and their full-year outlooks.

• One member said that postponing a rate hike could offer greater clarity on the US economic outlook, though the cost of waiting would gradually rise.

• Some members discussed the cost-benefit balance of waiting further, citing Japan’s long experience with deflation.

• One member emphasized that it is appropriate to maintain accommodative monetary conditions as long as inflation expectations remain insufficiently anchored.

• Some members noted that exporters’ profits currently have a buffer against the impact of US tariffs, built up during the past few years of a weak yen.

• Another participant added that the effect of US tariffs has been smaller than expected and is unlikely to derail Japan’s economy.

Source: xStation5