(Bloomberg) — A leading dove on the Bank of Japan’s policy board stressed the need to keep financial conditions easy until inflationary expectations take root, reinforcing the bank’s stance that it won’t move too soon a day after the new government urged caution on rate hikes.
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“It will still take time to establish a public mindset that’s aligned with the 2% inflation target,” member Asahi Noguchi said Thursday in a speech in Nagasaki, southwestern Japan. “Until then, it’s important, more than anything, to maintain accommodative financial conditions patiently.”
Noguchi, one of two dissenters from the July 31 decision to hike rates, spoke after Prime Minister Shigeru Ishiba said Wednesday he sees no need for a rate hike for the time being. Noguchi’s remarks confirm market views that some dovish opinions remain on the nine-member board even as authorities have sought to normalize policy by rolling back ultra-loose settings.
In voting against the July move, Noguchi said he wanted more time to study data in order to make a careful decision.
The tone of Noguchi’s remarks Thursday was more or less in line with views expressed by Governor Kazuo Ueda, who has indicated he sees no rush to raise the benchmark rate. Economists widely predict the BOJ will hold settings steady when it next sets policy on Oct. 31, and many think the next move won’t come until January.
Ueda met with Ishiba Wednesday just a day after Ishiba formed his administration.
Japan’s stocks rose and the yen continued to weaken Thursday after the currency dropped by the most since June 2022 a day earlier when Ishiba emerged from his discussion with Ueda and declared that the environment isn’t right for another rate hike.
In his speech, Noguchi also highlighted positive changes in service prices, wages and consumer spending, indicating that a future rate hike isn’t off the table altogether.
Speaking to reporters after the speech, Noguchi declined to comment on Ishiba’s remarks. He said he takes comments by politicians seriously as they represent the public, but monetary policy is conducted for the purpose of achieving a price target, he said.
As Japan’s financial conditions remain accommodative even after two rate hikes this year, Noguchi said he can’t deny there is room for adjusting the degree of easing further. But it should be done with the utmost care, as it’s impossible to know the most appropriate level for the benchmark rate in advance.
“It has to be done as if we’re crawling forward on elbows and knees, on our stomachs,” Noguchi said.
(Updates with comments from afternoon press conference)
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