BoJ Hawks Eye Path Toward 2% Neutral Rate, Summary Shows

The Bank of Japan's June meeting summary showed several policymakers arguing that the neutral interest rate is around 2%, a level more than double the current 1% policy rate, according to the Summary of Opinions released Thursday.

One member warned that underlying CPI could overshoot the 2% target if the BoJ does not adjust policy appropriately. Another cited lingering supply-side pressures and logistics disruptions as risks to broader price increases. Multiple members said it is appropriate to keep raising the policy rate if the economic outlook holds.

One of the strongest views came from a member who said Japan's policy rate remains below the estimated neutral range and that the neutral rate appears to be around 2%. Another argued for moving rates closer to neutral sooner to avoid the need for aggressive hikes later.

The dissenting view came from a member who warned that rate increases could suppress business investment and trigger declines in inflation and production, with employment also at risk. That member, widely believed to be newcomer Toichiro Asada, voted against the hike. Asada is the first board appointee under Prime Minister Sanae Takaichi.

The debate inside the BoJ increasingly centers on the pace of future tightening rather than the need for it, the summary showed. Asada cast the lone dissenting vote.