The BOJ has debated the timing of rate hikes, with some calling for immediate action, a December summary by Reuters shows.

By Leica Kihara

TOKYO (Reuters) – Some Bank of Japan policymakers have seen conditions fall as they predict a move in the near future. Take a walk.

The BOJ kept interest rates at 0.25% at this month’s meeting, a move Governor Kazuo Ueda said would allow him to examine more data on next year’s wage rate and provide clarity on the incoming US administration’s economic policies.

There is considerable uncertainty in discussions on tax and fiscal policy in Japan and the policy stance taken by the new US administration as early as 2025, one member noted in a summary that called for policy to be maintained. Stable at the meeting of December 18-19.

Another opinion poll showed on Friday that small companies in Japan are still vulnerable to weak profitability and heightened uncertainty in overseas economies.

But others pointed out that conditions are falling to raise interest rates.

Underscoring the importance of monitoring the current uncertainty in the US economy, one member said the BOJ would “decide to raise the policy interest rate in the near term”.

“Despite doubts about the foreign economy, the Japanese economy is in a position where monetary accommodation can be adjusted,” another comment showed.

Hawk-dove division

The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July. He indicated he is ready to hike again if wages and prices move as planned.

In a Reuters poll earlier this month, all respondents expected the BOJ to raise rates to 0.50% by the end of March. The BOJ will meet next January 23-24 for a policy review.

While the conclusion was closely watched by markets for clues about the possibility of a January rate hike, the nine-member board appeared divided between those favoring action soon and others upset about wage growth and soft overseas demand.

One member in the hawkish camp said the BOJ should raise rates “in a forward-looking, timely and gradual manner” as price risks veer to the upside.

Another view is that the BOJ should raise rates earlier as import price increases, mostly driven by a weak yen, could further accelerate inflation.

At the October meeting, board member Naoki Tamura unsuccessfully proposed raising interest rates to 0.5%.

A member of the doves said there was no pressing demand at the moment as inflation was rising and wage growth was still out of step with inflation.

“Wage increase will take some time to increase the cost of services,” said another comment due to soft consumption.

Japan’s economy expanded to an annualized 1.2% in the three months to September, slower than the previous quarter’s 2.2% growth, while consumption rose a weak 0.7%.

BOJ policymakers hope that the recent increase in wages from 2.5% to 3% will boost wages and support consumption.

There are growing signs that companies are interested in continuing to pay hikes due to the ever-increasing labor shortage. But slowing demand in China and uncertainty over the policies of US President-elect Donald Trump could weigh on corporate profits.

The BOJ’s Regional Economies report on Jan. 9 hints that wage increases are expanding and taking root among small firms.

BOJ Vice Governor Ryozo Himino will hold a speech and news conference on January 14, which may give further clues as to whether the bank will raise rates next month.