BOJ Ideas: Updated Oct. 22, 2025.

Hawkish BOJ board member reiterates readiness for rate hikes

Article source: https://mainichi.jp/english/articles/20251016/p2g/00m/0bu/038000c

Ideas

Many central banks, globally, have increased or decreased the key rate as a way to prevent or avoid market shocks when it's needed to increase or decrease the rate in times of need.

What is not needed is increasing or decreasing the rate just to do it when an economy might suffer when there is no need to adjust the rate, as its better to let an economy adjust itself overtime, with any intervention from the central bank.

Market adjustments such as in a business cycle, most of the time, with take care of themselves over time and really don't need any central banks adjustments, as what the central bank might do can actually create more harm than good instead of just letting a market or economy adjust itself.

Yes, its good that the Bank of Japan is concerned about the increase in prices and its a known fact that many ff not all central banks, globally, have used increased rates as way to try and reduce in inflation in an economy.

The only exception, for a very long time, maybe ten years or so, has been the Bank of Japan, which kept its key rate as sub-zero due the fact they felt the Japanese economy was just too weak and any increase in the key rate would cause too many side-effects and do harm than good.

But that was then and now it a different era for the Bank of Japan, as the BOJ has actually increased the a few times the last couple of years to come more line with what other central banks, globally, have been doing.

It's good that the benchmark rate should be set closer to the neutral rate as that will bring markets into a position of not over-reacting to any real changes the BOJ might do in the future.

As to what the new Prime Minister is going to do in the future is still up in the air, as when any politician, globally, they say one thing when trying to get elected but another thing after they are elected.

Being a fiscal dove might be good for the Japanese economy and Japanese businesses, but again, when reality sets in and different groups want different things for the economy, politicians sometimes can do things completely different that what others think they might do.

Unfortunately, the BOJ repeatedly might have already acted too late as they really haven't done much since the pandemic while prices have continued to remain high for a very long time.

But BOJ, for its part, has been very cautious about increasing or decreasing the rate too much as it doesn't want to inflict significant damage on the economy.

Whether good or bad, any move that the BOJ is going to  do will have some side affects as every central bank knows whatever it does is going to affect some in the economy negatively but hopefully it will affect an economy in a positive way more.

Most central banks want inflation or consumer prices to be at or around 2 percent as they feeits a manageable level for the economy and at 2 percent not too many people are going to suffer from it.

But at 3 percent or higher, there is the increased chance that more and more people in an economy are going to suffer from increased prices and their disposable income is going to be decreased to the point that they have nothing left to spend in an economy.

The BOJ is a very conservative central bank, like most central banks, and any extra economic activity such as the increase in tariffs might have a significant effect on the economy, and of course in this case the Japanese economy so the BOJ is going to watch it very carefully before it makes any move to as to whether it should or shouldn't related to the tariff situation.

In this case, if the tariff situation does have a significant effect on the Japanese economy the most likely move probably will be to reduce the key rate as as way to help stimulate the Japanese economy as the economy, again has probably turned stagnant.

As far as inflation is concerned an increase of the key rate to 0.75 might be the correct move, but unfortunately if the Japanese economy starts to decrease significantly due to the US tariff situation that might cause the BOJ to ignore the inflation situation and actually might consider decreasing the key rate as a way to try and help stimulate the economy.

But the BOJ will have to decide which economic action, inflation or the tariff situation, is the most important economic action that will affect the Japanese economy the most and then of course will then make the best move possible to help the economy.

Have a nice day!