The Bank of Japan started a two-day policy meeting on Tuesday. The focus is on whether the central bankers will decide on another hike in the benchmark interest rate.
Some of them expect to see further inflationary pressure following a continued rise in consumer prices. The yen remains weak against the dollar, making imports more expensive.
Wages have not kept up. Inflation-adjusted pay has declined for 26 straight months, prompting consumers to tighten their purse strings.
The BOJ effectively raised the short-term rate in March for the first time in 17 years, ending its negative-rate policy. A further hike could raise the costs of servicing mortgages and corporate loans, as well strengthen the yen’s value.
Another focus at the meeting is the central bank’s bond-buying program. The BOJ has been purchasing about six trillion yen, or nearly 39 billion dollars, of Japanese Government Bonds every month as part of its massive monetary-easing policy.
But it decided in June to trim that amount over the next one to two years. It has promised to come up with details on the plan at the current meeting.