During their September policy meeting, Bank of Japan (BOJ) policymakers emphasized the importance of enhanced communication with financial markets, with some members expressing caution over potential economic downturn risks.
According to the summary of opinions from the September 19-20 meeting, one board member highlighted the necessity for the BOJ to communicate its policy stance and related factors more clearly when considering further rate hikes. The BOJ initiated the normalization of its monetary policy in March this year.
The latest summary indicates that the BOJ will aim to provide clearer signals to the market before any future rate increases. The July 31 rate hike decision, which led to significant market volatility and the largest record drop in the Nikkei 225 index, was criticized for its abruptness.
Following the release of the summary, the yen weakened against the dollar, and Japan's 10-year government bond yields slightly declined. This reflects market participants' focus on the BOJ's reiteration that it has the flexibility to wait and assess economic conditions before deciding on further rate hikes.
The summary also frequently mentioned the need for caution regarding the global economy and financial markets, aligning with Governor Kazuo Ueda's recent remarks. He highlighted the necessity of closely watching whether the Federal Reserve can achieve a "soft landing" for the U.S. economy after initiating a rate-cutting cycle in September.
Most analysts expect the BOJ to maintain its current stance following the market turmoil in early August, particularly given the uncertainties surrounding the U.S. economy and upcoming elections in both the U.S. and Japan. A Bloomberg survey indicates that the BOJ might consider another rate hike in December.
