BOJ and Ideas On Rate Hikes: Ideas Later.

BOJ's Sato backs gradual rate hikes despite opposing Sept. increase

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TOKYO (Kyodo) -- Bank of Japan policy board member Ayano Sato said she supports gradually raising the central bank's policy interest rate, signaling openness to further hikes.

Sato, one of two board members who opposed a rate hike at the BOJ's September policy meeting, said in a recent interview with Kyodo News she is concerned consumer spending could weaken but declined to comment on the timing of the next rate hike.

Sato, who joined the BOJ board in June, said the timing of future rate increases should take into account trends in private consumption and income.

"I support the policy of adjusting (the key rate) gradually," Sato said, adding that higher rates "can contribute to achieving sustainable economic growth."

The BOJ last month raised its key interest rate to a 31-year high of 1.25 percent, signaling further hikes may follow.

Sato and Toichiro Asada voted against a rate increase at the September meeting. Both are considered reflationists who favor monetary easing and aggressive fiscal spending.

Their opposition fueled expectations that further rate hikes would be difficult, sparking yen selling against the U.S. dollar as investors bet that the gap between U.S. and Japanese interest rates would remain wide.

Sato was appointed to the BOJ board by the government of Prime Minister Sanae Takaichi, who has expressed caution about rate increases.

Sato stressed that the central bank should make policy decisions independently while ultimately aligning its policy with the government's expansionary fiscal stance.

Explaining her opposition to the rate hike at the previous meeting, Sato said the momentum in private consumption "has not been that strong."

She declined to specify which economic indicators supported her assessment, saying only that she considers a range of data.

She said upside risks to inflation have also increased somewhat, citing instability in the Middle East and higher crude oil prices.

At the same time, she warned that strong artificial intelligence-related demand could weaken quickly depending on moves by major companies. The outlook could "shift sharply toward pessimism," she said.

Sato also said that if the situation in the Middle East continues to deteriorate, the economy could cool rapidly and inflation could slow.

Article source:   https://mainichi.jp/english/articles/20261007/p2g/00m/0bu/030000c