A key advocate of the Bank of Japan’s dovish stance reiterated the need to maintain easy financial conditions until inflation expectations become more deeply ingrained, emphasizing that the central bank is not in a rush to tighten policy. This comes a day after the newly formed government urged caution on rate hikes.
Asahi Noguchi, one of the most dovish members of the BOJ’s policy board, expressed his views in a speech delivered Thursday in Nagasaki, Japan. He highlighted that Japan’s inflation expectations are not yet fully aligned with the BOJ’s 2% target.
“Establishing a public mindset that embraces the 2% inflation target will take time,” Noguchi said. “Until that mindset is entrenched, it’s crucial to maintain accommodative financial conditions with patience.”
Noguchi, who was one of the two dissenting votes against the central bank’s July decision to raise rates, underscored the need for more data before making any significant changes to the current monetary policy stance. His remarks echo those of Governor Kazuo Ueda, who has also suggested that the BOJ sees no immediate need to raise its benchmark rate.
Market expectations align with this view, with many economists predicting that the BOJ will keep its policy unchanged when it meets on October 31. Some experts believe that any potential rate hike is unlikely until January 2025 at the earliest.
Noguchi’s comments came after Prime Minister Shigeru Ishiba indicated on Wednesday that he sees no immediate need for rate hikes, a stance that has supported a weakening yen. Japan’s stock market rose, and the yen continued to lose value, hitting its lowest point since June 2022.
Despite supporting easy monetary policy, Noguchi noted some positive economic developments, such as improvements in service prices, wage growth, and consumer spending. These factors suggest that a future rate hike is still possible, though not imminent. He stressed that any further tightening of monetary policy should be approached with extreme caution.
“Adjusting the degree of easing must be done with utmost care, given the uncertainty about the most appropriate level for the benchmark rate,” Noguchi said. “It’s like crawling forward on elbows and knees, slowly and carefully.”
The central bank remains focused on achieving its price stability goal, and Noguchi acknowledged that while political figures like Prime Minister Ishiba reflect public sentiment, monetary policy decisions will ultimately be based on data and the central bank’s inflation targets.
