BOJ agreed on need for low rates, saw wage hikes as key to outlook

Some in the nine-member board saw price rises broadening and leading to changes in long-held public perceptions that inflation and wages would not rise much in the future, according to the minutes released on Tuesday.

But the members agreed the economy needed massive monetary support to weather the hit from rising commodity prices and supply disruptions caused by Chinas COVID-19 lockdowns.

“The board agreed that uncertainty surrounding Japans economy was extremely high,” the minutes showed.

“Many members spoke about the importance of wage increases from the perspective of achieving the BOJs price target in a sustained and stable fashion.”

At the June meeting, the BOJ maintained ultra-low interest rates and vowed to defend its cap on bond yields with unlimited buying, bucking a global wave of monetary tightening in a show of resolve to focus on supporting a tepid recovery.

“Japan must create a resilient economy at which consumption continues to rise even when companies raise prices,” one board member was quoted as saying.

“The BOJ must maintain monetary easing until wage hikes become a trend, and help Japan achieve the banks price target sustainably and stably,” another member said.

Japan‘s core consumer prices rose 2.2% in June from a year earlier, exceeding the BOJ’s target, due mostly to surging fuel and commodity costs blamed on the war in Ukraine.

The rising cost of living is causing particular pain to households, as companies remain reluctant to hike wages due to uncertainty about their business outlook.

Inflation-adjusted real wages, a key gauge of consumers purchasing power, fell 1.8% from a year earlier, extending a decline to post the biggest year-on-year drop in nearly two years.