(Bloomberg) -- One of the Bank of Japan’s most dovish board members didn’t rule out the possibility of a rate hike this month, saying that it’s important to analyze the data first.
“I’ve said this before, but I’m not against rate hikes themselves,” said Toyoaki Nakamura in a press conference Thursday afternoon, after he had earlier given a speech to local business leaders in Hiroshima which pointed to his expected more dovish stance. “It’s important to make decisions based on data.”
The yen gained against the dollar following Nakamura’s comments, as traders read his views as potentially strengthening the case for another rate hike this month. In June, Nakamura had told reporters a rate hike was too early. The board member added that he’s closely watching the upcoming wages data and Tankan business sentiment survey.
Nakamura’s remarks come as expectations about the timing for the BOJ’s next rate hike have fluctuated over the last week. While Nakamura gave mixed signals Thursday, it’s unclear how his peers on the board are viewing the need to hike rates further, after Governor Kazuo Ueda kept all options open with recent remarks.
Earlier Thursday morning, Nakamura had also said the central bank should exercise caution when it makes adjustments to the degree of monetary easing, and keep things consistent with the state of the economic recovery.
“We are at a state where it’s important to adjust the degree of monetary easing carefully in accordance with the economic recovery by assessing a broad array of data,” Nakamura said. The yen weakened immediately after the morning speech as traders pared back bets on a December move.
Ueda said in an interview published Saturday that the timing for a hike is “nearing” as economic data have been in line with projections. The governor stopped short of offering specific hints pointing to a December move, and several days later Jiji News cited people familiar as indicating authorities are leaning toward waiting until January.
“I’m not confident about the sustainability of wage hikes,” Nakamura said. “I see a possibility that the annual inflation rate may not reach 2% from fiscal 2025 onwards,” while the median outlook among the nine-member board is for it to be more or less about 2%, he said.
Traders see about a 36% chance of a rate hike at the board meeting concluding on Dec. 19, down from 66% at the end of last week. Just over half of economists surveyed in October by Bloomberg predicted the BOJ would hike this month. Almost 30% said the move would come in January.
Nakamura, a former executive of Hitachi Ltd., voted against raising the benchmark interest rate in March and in July after also objecting to making adjustments to the bank’s yield curve control mechanism last year. In dissenting, Nakamura consistently cited the need to examine more data.
Still, Nakamura said Thursday that he wasn’t against the rate hikes themselves in March and July. Japan’s economy has been performing in line with his view, he added.
Among factors he wants to carefully monitor currently are the profitability of small companies and the rate at which businesses are able to pass on rising costs to customers via price hikes, Nakamura said in the speech.
Japan’s corporate profits dropped for the first time in seven quarters in the period ending Sept. 30, according to a government report earlier this week. While large businesses saw an increase, small firms suffered a 22% plunge, raising concerns among some economists over the prospects for broad wage increases in the year ahead.
(Updates to add Nakamura’s comments from afternoon presser, market moves.)
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