BOJ board split on economy’s strength post stimulus exit, March summary reveals

In March, Bank of Japan policymakers met to discuss the economy’s ability to handle an exit from ultra-loose monetary policy. The summary of opinions showed that the next interest rate hike may take some time due to the division among board members. The BOJ recently made a historic shift away from focusing on reflating growth with massive monetary stimulus, ending eight years of negative interest rates and other unconventional policies.

At the meeting, some policymakers believed that recent data, such as significant wage hikes from large companies, justified ending ultra-loose policy since the bank is closer to its 2% inflation target. However, others stressed the need for further examination to determine if wage gains will spread to smaller firms and if rising labor costs are affecting services prices. One member mentioned the importance of a cautious stance even after ending negative rate policy, as the economy may not require rapid interest rate hikes.

The decision to exit ultra-loose policy at the March meeting was made by a 7-2 vote, with Asahi Noguchi and Toyoaki Nakamura dissenting. The summary of opinions suggests that policymakers are closely monitoring the economic situation to determine the right timing for future interest rate hikes.

By Sophia Gonzalez

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