(Bloomberg) -- Bank of Japan officials see little cost to waiting before raising interest rates while still being open to a hike next week depending on data and market developments, according to people familiar with the matter.
Even if the BOJ decides to wait until January or a while longer, authorities see it as not entailing a huge cost because signs point to limited risk that inflation might overshoot, the people said. At the same time, some officials are not against a rate hike at this meeting if it is proposed, according to the people.
The yen weakened against the dollar following the report, after some whipsawing. It briefly hit 152.82 against the greenback around 10:25 p.m. in Tokyo, after earlier trading at around 151.60. It was moving at around 152.10 to the dollar Thursday morning.
Markets have been trying to figure out when the BOJ might raise rates next, with December and January both looking like possibilities. This comes after mixed signals from officials and media reports, with BOJ Governor Kazuo Ueda saying in a Nikkei interview last month that hikes are “nearing.” A few days later, Jiji Press reported concerns within the bank about raising rates too soon.
Last week, dovish policy board member Toyoaki Nakamura said he’s not opposed to a hike in general, but would have to look at data before making a decision this month.
Officials view the next rate hike as a matter of time, with the economy and inflation in line with their projections, according to the people. The officials will make a final decision only after carefully assessing data and financial markets before delivering the policy decision on Dec. 19, the people said.
Ueda and his board are set to discuss whether they need to raise the benchmark rate from 0.25% next week. With the yen not showing a strong momentum toward weakness unlike the situation in July, the officials judge that the risk of the currency pushing up inflation has softened.
Among the data points BOJ officials will be carefully parsing is US CPI data that came out Wednesday, the quarterly Tankan business sentiment survey which will be released on Friday and the result of the Federal Reserve meeting just several hours before the BOJ’s policy decision, according to the people.
November inflation in the US rose in line with expectations, strengthening investors’ views that the US central bank will likely go ahead with another cut to borrowing costs next week.
(Updates with additional background, market moves.)
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