At a recent meeting of the Bank of Japan (BOJ), policymakers were divided on whether the economy was ready to handle an exit from ultra-loose monetary policy. Some board members believed that recent data, such as significant wage hikes from large companies, justified ending ultra-loose policy since the bank was closer to its 2% inflation target. However, others emphasized the need for further examination to determine if wage gains would spread to smaller firms and if rising labor costs were affecting services prices.
One member cautioned against a rapid interest rate hike after ending negative rate policy, arguing that the economy may not require it. The decision to end ultra-loose policy was made by a 7-2 vote, with Asahi Noguchi and Toyoaki Nakamura dissenting. Despite this shift in focus away from reflating growth with massive monetary stimulus, policymakers are closely monitoring the economic situation to determine the right timing for future interest rate hikes.
