Bank of Japan's Asada Argues Against an Early Rate Rise as Producer Prices Climb 7.1%

Toichiro Asada, a member of the Bank of Japan's policy board, argued against a near-term interest-rate increase in a speech in Nagasaki on Thursday. Reuters reported that Asada said premature rate rises could hurt growth and push underlying inflation down. Asada voted against the bank's rate increases in June and September.

Asada argued that the bank should move carefully on the pace of tightening, without calling for an end to the tightening cycle. He said the bank must give due consideration to how fast it raises the policy rate, investingLive reported. The Bank of Japan estimates Japan's neutral nominal interest rate at slightly above 1% to 2.5%, which puts the current 1.25% policy rate inside that range. Asada did not say how he would vote in December. Reuters noted that a single dissent would not block a majority decision to raise rates.

The speech came on the same morning that data showed Japan's producer prices rose 7.1% in October, faster than economists had forecast. The gap between that figure and a 1.25% policy rate leaves real short-term interest rates deeply negative on a producer-price basis. Across the Pacific, the US 10-year Treasury yield closed Tuesday at 4.98% after faster-than-expected US inflation data revived talk of Federal Reserve rate increases.