The minutes of the Bank of Japan's December meeting show that some decision-makers believe the conditions for a rate hike are already in place, with one person expecting a rate hike "in the near future," maintaining the possibility of a January hike.

At this month's meeting, the Bank of Japan kept the interest rate unchanged at 0.25%, with Governor Ueda Kazuo explaining that this move is to carefully study more data regarding next year's wage growth momentum and clarify the economic policy of the new government in the USA.

The minutes quoted one member saying he called for maintaining policy stability at the meeting on December 18-19. He stated, "There is significant uncertainty in the discussions regarding Japan's tax and fiscal policy, as well as the policy stance of the new government in the USA." Another viewpoint expressed concerns about the still weak profitability of small businesses in Japan and the high uncertainty in the overseas economy.

However, others hinted that the conditions for a rate hike are forming.

The minutes showed that one member emphasized the need to monitor the uncertainty of the US economy at present, but he indicated that the Bank of Japan "may decide to raise the policy interest rate in the near future."

Another opinion indicated, "Although there is still uncertainty in the overseas economy, the Japanese economy is in a state where the level of monetary easing can be adjusted."

The Bank of Japan ended negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signaled that it is prepared to hike rates again if wages and prices move as expected.

A survey conducted earlier this month shows that all respondents expect the Bank of Japan to raise interest rates to 0.50% before the end of March. The next monetary policy meeting of the Bank of Japan will be held from January 23 to 24.

Despite the market closely monitoring the minutes for any hints of potential interest rate hikes in January, the nine-member board seems to have some disagreements, with some members favoring prompt action while others are concerned about slowing wage growth and weak overseas demand.

The minutes show that a member of the hawkish camp stated that the Bank of Japan must raise interest rates in a "forward-looking, timely, and gradual manner" as price risks have shifted to the upside. Another viewpoint suggests that the Bank of Japan should preemptively raise rates because the increase in import prices, driven mainly by the weak yen, may further accelerate inflation.

At the October meeting, board member Naoki Tamura proposed raising rates to 0.5%, but it did not succeed.

Among the dovish members, one stated that there is currently no urgent need to raise rates due to stabilizing import costs and wages not yet catching up with inflation. Another viewpoint argues that due to weak Consumer, "wage increases need some time to push up service prices."

As of September, Japan's annualized economic growth rate for the three months was 1.2%, which has slowed from 2.2% in the previous quarter, with Consumer growing only 0.7%.

Policy makers at the Bank of Japan hope that workers' fixed wages (which have recently been growing at a rate of 2.5% to 3% per year) can continue to grow and support Consumer.

An increasing number of signs indicate that due to the intensified labor shortage, companies are eager to continue raising wages. However, the slowing demand from the Asian major powers and the uncertainty surrounding the policies of President Trump in the USA may impact corporate profits.

The regional economic report to be released by the Bank of Japan on January 9 will provide clues as to whether wage increases are spreading and taking root among small businesses.

Bank of Japan Deputy Governor Ryozo Himino will also give a speech and hold a news conference on January 14, which may further indicate whether an interest rate hike will occur next month.