Central Bank’s Policymakers Divided on Exiting Ultra-Loose Monetary Policy: Interest Rate Hike May not Coming Soon

March Summary Reveals BOJ Board Split on Economy’s Strength Following Stimulus Exit

The recent March meeting of the Bank of Japan’s policymakers saw a divided opinion on whether the economy was strong enough to withstand an exit from ultra-loose monetary policy. This uncertainty suggests that the next interest rate hike may not happen soon. Following the end of eight years of negative interest rates and other unconventional policies, the BOJ marked a significant shift in its approach to boosting economic growth.

During the meeting, some policymakers argued that recent data such as significant wage hikes offered by large companies supported the decision to end ultra-loose policy. They believed that the goal of achieving sustained 2% inflation was within reach. However, others on the nine-member board called for further examination of wage increases among smaller firms and the impact of rising labor costs on service prices.

Despite concerns about raising interest rates quickly, there were concerns about cautiousness in ending ultra-loose policy at the March meeting. The vote to end this policy was 7-2, with former academic Asahi Noguchi and ex-corporate executive Toyoaki Nakamura in dissent. Overall, the summary of opinions from the Bank of Japan’s March meeting highlights ongoing debate within the central bank about appropriate timing and pace of monetary policy changes.

Leave a Reply