BOJ's Sato signals support for gradual rate hikes but no pre-set timeline

Sato's comments have softened the impression of a hardening dovish bloc that caused the yen to be unsettled after the September split vote. When even a board member who is usually reluctant to raise rates accepts that policy remains accommodative, the barrier to the next increase looks reduced, even if the timing is still uncertain. Oil is the critical factor. As a large crude importer, Japan directly feels the impact of Middle East supply disruptions through higher import costs, and a dove pointing to that pressure suggests energy prices are now influencing the policy debate across the board. Her opposition to a fixed pace creates room to argue for a delay, so the yen's reaction will likely depend on whether other board members also reinforce the gradual-but-continuing message.

The central bank's latest dovish voice said she is not against further rate increases but opposes a rushed approach, with Middle East oil prices being a significant persuader.

Summary:

• BOJ board member Ayano Sato said accommodative financial conditions support raising rates in multiple stages, according to Kyodo.
• She agreed on the need for gradual adjustment but does not endorse a pre-set pace of increases.
• Sato said the price outlook risks are tilted upward due to rising oil costs from the Middle East conflict.
• She said the BOJ must make policy decisions independently, while remaining aligned with the government's proactive fiscal policy.
• Appointed under Prime Minister Sanae Takaichi, Sato was one of two board members who voted against the September rate hike to 1.25%.

The Wednesday report from Kyodo News stated that BOJ board member Ayano Sato backs a multi-stage increase in interest rates given accommodative financial conditions. According to the report, Sato—one of the board's two September dissenters—is not against further tightening but only against a fixed schedule.

Sato concurred with the need for gradual adjustment but rejected a fixed schedule for increases, Kyodo News reported. She described price outlook risks as slightly skewed to the upside because of rising oil costs linked to the Middle East conflict. She added that the BOJ must decide monetary policy independently, remaining consistent with the government's proactive fiscal policy.

Sato's remarks are striking given her background. She was appointed to the BOJ board in June under Prime Minister Sanae Takaichi, who is careful about rapid rate raises, and she was regarded as an advocate of loose policy. In September, Sato and another Takaichi appointee, Toichiro Asada, voted against the BOJ's decision to lift the policy rate from 1% to 1.25%. Sato argued then that the time was not right to increase rates.

The 7-2 vote brought the policy rate to its highest since 1995, the smallest interval between increases under Governor Kazuo Ueda. The yen declined on the decision as investors interpreted the two dissents as a possible brake on more tightening.

Sato's comments add complexity to that interpretation. Her depiction of financial conditions as accommodative fits the BOJ's broader view that real interest rates are still deeply negative, and her concern about oil-driven inflation echoes the bank's past warnings about price risks from energy costs and a weak yen. Now, her objection appears to be about the speed of tightening, not the direction.

Analysts surveyed by Reuters after the September meeting forecast the policy rate would reach 1.5% by the end of March and 1.75% in the second quarter of 2027. Sato's remarks do not change that trajectory, but they reduce the likelihood that the board's dovish members would strongly block it.