October Meeting Minutes Highlight Inflation Persistence and Asset-Price Risks

The Bank of Japan's October policy meeting minutes reveal a central bank navigating persistent inflation pressures and emerging asset-price risks while maintaining a cautious stance on further rate hikes. Policymakers noted core inflation running around 3%, driven primarily by food prices and wage pass-through, while flagging concerns about rising urban property prices fueled by deeply negative real interest rates and yen depreciation.

Global Economic Landscape: Diverging Fortunes

Board members assessed global conditions as broadly stable but uneven. The U.S. economy was seen maintaining solid growth supported by AI investment and resilient consumption, though with emerging weakness in employment growth. Europe appeared relatively weak, while China's economy was identified as a growing downside risk amid tariff pressures and ongoing property-sector adjustment.

Domestic Assessment: Accommodative Conditions with Emerging Risks

Japan's financial conditions remained highly accommodative with signs of credit expansion in real estate and M&A activity. Policymakers noted:

  • Urban property prices rising due to negative real rates and overseas capital inflows
  • Business investment on moderate upward trajectory
  • Private consumption holding up despite rising prices prompting greater thrift
  • Limited spillover from U.S. tariffs into investment and employment trends

Policy Debate: Gradual Normalization vs. Immediate Action

The minutes reveal growing internal divisions within the policy board:

  • Majority view: Supported maintaining 0.5% rate, needing more time to confirm wage durability
  • Minority position: Favored immediate hike to 0.75% citing inflation risks and yen depreciation
  • Shared commitment to gradual normalization with wages as key trigger for future moves

Policymakers emphasized the importance of the 2026 spring wage negotiations as a critical determinant for future rate decisions, alongside careful monitoring of global trade developments and exchange-rate movements.