The Bank of Japan’s September Summary of Opinions revealed a widening divide on policy direction.
On the hawkish side, several members said conditions are falling into place to resume rate hikes, citing a firmer economy, improving consumption and underlying inflation edging closer to the 2% target. Some argued rates should be lifted toward neutral, warning that Japan has roughly achieved its price goal and remains vulnerable to second-round inflation effects. Others stressed that Japan’s real interest rate is still low compared with overseas peers.
Doves, however, urged patience. Some said raising rates now risked surprising markets and called for waiting on fresh data such as the Tankan survey and corporate earnings. Others emphasised that global risks — particularly from U.S. tariffs and their gradual impact on growth — warranted caution. One member argued the BoJ must continue to support the economy with low rates for now.
Overall, the debate underlined building pressure from hawks to normalise policy, while doves highlighted uncertainty over inflation dynamics and global trade headwinds. The yen reaction was muted, reflecting scepticism that near-term tightening is imminent.
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Market-impact to watch
- FX: Yen steady, with traders unconvinced policy normalisation is imminent despite hawkish voices.
- Hawks highlight case for moving rates toward neutral, but doves emphasise global risks and data dependence.
- Equities: Investors will weigh risks of gradual tightening against support from low rates amid global uncertainty.
