28.01.202601:20:32UTC+00BOJ Board Eyes Further Hikes: December Minutes

The minutes from the Bank of Japan's December meeting revealed that the board members are inclined towards continuing with rate hikes, provided the projections for growth and inflation remain robust. Despite this, they are committed to maintaining an overall accommodative monetary policy stance. The assessment indicated a moderate recovery in the economy, although the manufacturing sector is experiencing profit pressures due to U.S. tariffs. However, these challenges have not significantly affected investment, employment, or wage levels. The board observed that exports and industrial output have remained stable, while private consumption has been buoyant, supported by increases in income and employment, despite the dampening effect of rising prices.

Regarding inflation, the majority of members predict that the core Consumer Price Index (CPI) will decelerate to below 2% through the first half of fiscal year 2026, as food prices decline and government initiatives help to mitigate price pressures. The board concurred that financial conditions would remain accommodating even with a policy interest rate of 0.75%, acknowledging that real interest rates are still severely negative. They emphasized the need for policy decisions to be made on a meeting-by-meeting basis without a predetermined schedule, ensuring a meticulous evaluation of economic, price, and financial trends.