Bank of Japan board member Ayano Sato says she backs continued gradual rate increases, softening the dovish read of her September dissent against the hike to 1.25%. Sato, appointed by Prime Minister Sanae Takaichi's government, ties further moves to household consumption trends rather than opposing tightening outright.
Bank of Japan Policy Board member Ayano Sato has walked back the dovish signal markets took from her September dissent, saying in an interview with Kyodo News on October 5 that she supports continued gradual tightening. Sato was one of two board members who voted against last month's hike to 1.25%, but her remarks now suggest the dissent was about timing, not direction.
According to Kyodo News: "I support the policy of adjusting (the key rate) gradually", Sato said, adding that higher rates can contribute to achieving sustainable economic growth. The comment matters because Sato joined the BOJ board in June after being appointed by the government of Prime Minister Sanae Takaichi, who has expressed caution over higher interest rates. Sato stressed that the BOJ should decide monetary policy independently, even while it ultimately aligns with the government's broader expansionary fiscal policy stance.
Consumption, not direction, drives her caution
Explaining her September dissent, Sato said private consumption momentum has not been that strong, and argued that future rate decisions should weigh trends in household spending and income. The distinction is subtle but important: she is not resisting further hikes, just preferring a slower pace until domestic demand looks more durable.
A two-sided risk picture
Sato also described a more balanced risk environment than a simple dovish read would imply. She acknowledged that inflation risks have increased somewhat because of Middle East instability and higher crude oil prices. But she warned that strong AI-related demand could weaken abruptly, pushing the outlook sharply toward pessimism, and that a worsening Middle East conflict could likewise cool the economy and eventually slow inflation.
For markets, the takeaway is that even a board member associated with the BOJ's dovish flank is not rejecting further normalization. The debate increasingly centers on how quickly the BOJ should tighten, rather than whether it should continue at all.
Source: ActionForex
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