By Leika Kihara
TOKYO, Sept 28 (Reuters) - Many Bank of Japan policymakers saw the need to focus on mounting inflation risks, with some calling for faster interest rate increases, minutes of their July meeting showed, cementing the case for further hikes to still-low borrowing costs.
After raising interest rates in June, the central bank paused in July before pushing its policy rate to a 31-year high of 1.25% in September, as the Middle East war and a stubbornly weak yen lifted prices of fuel and raw
material imports.
Given mounting inflation risks, many in the nine-member board said the BOJ was gradually shifting its policy focus towards anchoring underlying inflation around its 2% target, rather than pushing up prices, the minutes showed on Monday.
"Markets appeared to be expecting the BOJ to raise interest rates with intervals of about six months. But the pace of rate hikes could be faster than such market expectations, given underlying inflation had approached 2% and the greater need to focus on upside price risks," one member was quoted as saying.
A different member said the BOJ must pay particular attention to upside price risks and "adjust its policy rate nimbly," the minutes showed.
The BOJ must speed up rate hikes as the risk of waiting was no longer marginal, a third member was quoted as saying, warning that the economy will face huge damage if inflation risks materialise.
At the July 30-31 policy meeting, the BOJ kept interest rates steady at 1%. But it warned that underlying inflation could exceed its target and said future policy discussions would focus on upside price risks.
(Reporting by Leika Kihara; Editing by Thomas Derpinghaus and Sonali Paul)
