The Bank of Japan’s June Summary of Opinions indicated broad support among policymakers for continuing rate hikes, citing underlying inflation moving closer to the 2% target while financial conditions remain accommodative. Members said that if the economy and prices evolve in line with the Bank’s outlook, further rate hikes would be warranted. Some argued Japan’s policy rate remains below the estimated neutral interest rate, seen at around 2%, and should be brought closer to that level to provide greater flexibility to adjust policy in either direction. They also suggested that gradual increases every few months could help avoid the need for more rapid and aggressive tightening later. However, one member cautioned that higher interest rates could curb business investment, weaken aggregate demand, and trigger simultaneous declines in inflation, production, and employment, arguing the board should keep rates unchanged for now.

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