The Bank of Japan’s dovish board member Asahi Noguchi declined to reinforce growing market speculation over a December rate hike, instead taking a neutral stance and underscoring the importance of adjusting policy only at the right time.
Earlier post, recapping now:
While acknowledging the BoJ can resume raising rates now that the risks from U.S. tariffs are fading, he argued any tightening must be done “in a measured, step-by-step manner.”
Noguchi warned that keeping real rates too low for too long risks weakening the yen and pushing inflation higher than needed — especially as Japan approaches full employment and the positive effects of a weaker currency diminish. He noted that exchange-rate moves remain an important transmission channel, and recent yen volatility underscores the economic costs of prolonged accommodation.
With inflation exceeding 2% for more than three years and wage pressures building, Noguchi said sustained real wage gains around 1% — expected sometime in fiscal 2026–27 — will be key to anchoring inflation at target. Until then, he urged the BoJ to strike a balance: moving neither too quickly, which could choke off wage momentum, nor too slowly, which risks destabilising prices. The next policy meeting is on 18–19 December, where markets see a slim majority chance of a rate increase.
