Some officials of the Bank of Japan proposed to "wait and see" in July and make a decision after significant recovery in consumer spending data, which could also avoid presenting a too strong image of the central bank to the public.
Due to weak consumer demand, Japan's central bank's road to interest rate hike has become increasingly difficult.
According to sources cited by the media, considering weak consumer spending, the decision to raise interest rates by the Bank of Japan will be more complex.
On Wednesday (July 31), the Bank of Japan will hold its July policy meeting. Sources familiar with the matter told the media that there are currently two factions among central bank officials:
Some officials have proposed to "wait and see" in July until consumer spending data shows significant improvement before making a decision, which can also avoid presenting a tough central bank image to the public;
Other officials consider that current inflation is basically in line with expectations, therefore they maintain an open attitude towards raising interest rates in July, and given the many uncertainties in the future, there may be a missed opportunity for interest rate hike.
Sources added that the Bank of Japan may make a final decision after analyzing all the latest economic data on the 31st.
Currently, the market expects the Bank of Japan to maintain interest rates at this meeting, and considering the continued weakness of the yen, one-third of analysts expect a rate increase.
A survey last month showed that economists generally believe that if the Bank of Japan continues to do nothing on interest rates, it will further depreciate the yen.
Since the beginning of the year, the USD/JPY has risen by more than 10%.
In addition, it is reported that the Bank of Japan will also announce a reduction in its bond purchase plan in the resolution, and officials are currently aware that the scale of the central bank's monthly bond purchases is expected to be reduced to 3 trillion yen within two years according to market expectations.
Officials also expect that if bond yields rise significantly, the central bank will intervene.