Internal divisions within the Bank of Japan are becoming more pronounced as board member Toichiro Asada resists pressure for near-term interest rate increases. Asada, who previously opposed hikes enacted in June and September, pointed out that benchmark rates have already reached the neutral range of 1.1 percent to 2.5 percent. Premature monetary tightening could severely depress underlying inflation while consumption continues to lack momentum. Meanwhile, Reuters-polled analysts maintain expectations that the central bank will still proceed with raising borrowing costs to 1.5 percent in December.
Key points
Resistance from dovish board members complicates Governor Kazuo Ueda's efforts to achieve…: Resistance from dovish board members complicates Governor Kazuo Ueda's efforts to achieve consensus on future policy moves.
Recent price gains are not purely demand-driven, raising concerns that additional hikes c…: Recent price gains are not purely demand-driven, raising concerns that additional hikes could cool an already sluggish consumer sector.
Despite Asada's previous dissenting votes in June and September, market analysts still an…: Despite Asada's previous dissenting votes in June and September, market analysts still anticipate a rate increase before year-end.
Sources checked by our analysis pipeline: 1
NAGASAKI, Japan, Nov 12 : Dovish Bank of Japan policymaker Toichiro Asada pushed back against calls within the board for a near-term interest rate hike, arguing on Thursday that moving prematurely could hurt growth and push down underlying inflation.
Asada, who dissented on the BOJ's decisions to raise interest rates in June and September, noted the economy was growing moderately and underlying inflation was moving around the BOJ's 2 per cent target but said recent data showed consumption was lacking momentum.
The comments highlight a rift within the policy-setting board that may complicate Governor Kazuo Ueda's job in garnering consensus on the pace of future rate hikes.
"I believe the recent price increases have not necessarily been driven by demand factors," Asada said in a speech to business leaders in the southern city of Nagasaki.
"In this sense, I consider it necessary for the Bank to give due consideration to the pace of any policy rate hikes," he said, stressing the need to avoid cooling growth by moving too quickly on rates.
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