On July 31, 2024, a guide board was seen in Tokyo that read “Bank of Japan”.
Kazuhiro Nogi | AFP | Getty Images
Bank of Japan board members are divided on the future direction of interest rates, central bank meeting minutes July monetary policy meeting shows.
During the meeting, the board noted that economic activity and prices in Japan were “generally consistent with the central bank's outlook.”
this Bank of Japan’s economic outlook for July It mentioned that the country's core inflation rate (excluding fresh food prices) is likely to be about 2.5% in fiscal 2024 and about 2% in fiscal 2025 and 2026. Japan's fiscal year starts on April 1, so fiscal year 2024 will end in March 2025.
The central bank has set an overall inflation target of 2%.
The China Securities Regulatory Commission also pointed out that import prices have turned positive again and it is necessary to pay attention to upward price risks.
Some board members noted that given such risks, “modest adjustments by the central bank are appropriate.”
One member said interest rates should be raised gradually to prevent the risk of inflation exceeding the 2% target and requiring a rapid rate hike later.
Others seemed to disagree: “Normalization of monetary policy must not be an end in itself,” one member said, adding that future policy would need to be “carefully executed” by monitoring the various risks associated with the central bank's policy normalization goals. .
Another member pointed out that medium- and long-term inflation expectations are not anchored at 2%, and prices are still vulnerable to downside risks. Therefore, the Bank of Japan should avoid an “excessive increase” in market expectations for future interest rate hikes.
July decision
The Bank of Japan decided by a 7-2 split in July to raise its benchmark policy rate to “around 0.25%,” the highest rate since 2008.
Board members Toyoaki Nakamura and Asahi Noguchi objected, both arguing that more economic and corporate data needed to be studied.
At the July meeting, the bank also outlined its plans Reduce purchases Monthly Japanese government bond issuance in the January-March 2026 quarter was about 3 trillion yen ($19.64 billion). As of the announcement in March, the bank said it was buying about 6 trillion yen in Japanese government bonds each month.
Shortly after the Bank of Japan's decision on July 30, the yen strengthened for five consecutive days, hitting its highest level in eight months.
A stronger yen has led to unwinding of so-called “yen carry trades”, putting pressure on stocks.
Coupled with concerns about an economic recession triggered by disappointing economic data in the United States at the time, the Nikkei Index collapsed. The index fell for three consecutive days starting on July 31, including a 12.4% drop on August 5, hitting a record high. This day since 1987.