Bank of Japan members urged a slow rate hike and the interest rate decision at the end of October may be put on hold

The Zhitong Finance App learned that Bank of Japan member Adachi Seiji said in a speech to local business leaders in Kagawa City, Shikoku Island, Japan, that in the process of gradually raising interest rates, it is necessary to be careful that while maintaining a relaxed financial environment, interest rates should be raised as slowly as possible until the trend reaches 2%. Adachi Seiji emphasized the need to adopt a gradual approach to raise the benchmark interest rate. His remarks may reinforce the market's view that the central bank will stand still when it meets this month to formulate policies.

Adachi, a famous dovish in the committee, made this statement two weeks before the Japanese authorities met on October 31 to review policy. Economists generally expect this resolution to stand still. After Japanese Prime Minister Shigeru Ishiba (Shigeru Ishiba) expressed support for monetary easing on his first day in office earlier this month, some market participants postponed expectations for the Bank of Japan's next rate hike until January next year.

Adachi's emphasis on gradual policy tightening may increase market speculation that the Bank of Japan will not raise interest rates this year.

The data released on Friday is expected to show that consumer inflation in Japan will slow to 2.3% in September. This will be the slowest growth rate since April of this year, and it also means reaching or exceeding the Bank of Japan's 2% target for several consecutive months.

Adachi said that although economic data provides a basis for policy normalization, raising interest rates too fast may also risk the economy falling back into deflation.

According to Hideki Shibata, senior strategist at Tokyo Intelligence Lab Co. at Tokyo Intelligence Lab Co., the yen rose briefly after Adachi said that the conditions for policy normalization had been met, but then the trend reversed due to speculators leaving some long positions in the yen.

The yen has weakened in recent weeks due to the bleak outlook for the US and Japan interest rate gap narrowing. Even so, Adachi pointed out that a stronger yen may hinder the Bank of Japan's efforts to achieve sustained inflation after the Federal Reserve began an easing cycle last month. Adachi said, “The correction in weakening yen is likely to gain momentum, which may put downward pressure on inflation, especially commodity inflation.”

Adachi said that it is difficult to determine where exactly Japan's neutral interest rate should be. One committee member said that interest rates should be at least 1%, which indicates that the central bank still has room to raise interest rates while seeking to maintain an overall loose financial environment. Adachi said that currently “I think the most prudent estimate” is around 1%.

Central banks in industrialized countries are moving towards a neutral policy, and most of them are lowering interest rates. Dallas Federal Reserve Chairman Lorie Logan (Lorie Logan) emphasized earlier this week that the Federal Reserve should adopt a gradual approach when implementing easing policies.