(Nov 11): Bank of Japan (BOJ) board members discussed the need for caution on raising its benchmark rate and offered no clear hint of a move next month, a summary of opinions from its October policy meeting showed. 

“It cannot be judged at this point that markets are stabilising,” one of the nine board members said at the gathering, according to the summary released by the central bank on Monday. The central bank left interest rates untouched at the meeting held shortly before the US presidential election. 

“As the bank has been expecting to raise the policy interest rate at a moderate pace, it has time to monitor the future course of the US economy, including that after the presidential election,” the same member said. 

The lack of a clear steer on the likelihood of a rate hike in December or January will keep BOJ watchers guessing over the timing of the central bank’s next move. More than 80% of surveyed economists expect a rate move by January. 

Still, comments in the summary touching on the need for communication that doesn’t leave markets surprised suggests the BOJ will do more to telegraph its next move than it did in July.

For now, the signals on timing are mixed. Some opinions plainly suggested a rate hike isn’t off the table as the bank is simply waiting for the clouds to clear over the direction of the US economy. 

“The bank should consider further rate hikes after pausing to assess developments in the US economy,” one member said.   

Following the October decision to keep borrowing costs at 0.25%, governor Kazuo Ueda didn’t rule out a chance of a rate hike next month. The governor hasn’t spoken in public about his view over the US economy following Donald Trump’s election victory. 

The yen has weakened against the dollar over the past month, the move that would amplify inflationary forces. Many BOJ watchers see the fate of yen as a catalyst for the next rate hike.

One BOJ member flagged the potential for large fluctuations in foreign exchange rates as the Federal Reserve and the BOJ move in opposite directions on interest rates, according to the summary. The member also pointed to the risk of surprise decisions, complicating the path of policy going forward.

“Attention is warranted on the risk that monetary policy normalisation over the long run will be hindered if further rate hikes by the bank trigger a shock in the markets,” the member said. Some economists say the BOJ’s July rate hike was among the factors that helped trigger a global market rout in early August.

Japan’s unstable politics is another key element for the path of BOJ rate hikes as Prime Minister Shigeru Ishiba suffered the worst election result for the ruling party since 2009 last month. A key opposition leader has said the BOJ shouldn’t hike rates before March.  

One of Ishiba’s closest allies, Economic Revitalization Minister Ryosei Akazawa, attended the BOJ meeting for the first time. Akazawa has said it’s important for the BOJ to continue monetary easing to ensure a complete end of deflation. 

“The government will prioritise breaking free from deflation in its economic and fiscal management,” a Cabinet Office official said according to the summary. The government expects the central bank to achieve its price target “while continuing to closely cooperate and exchange views with the government”.

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