Amid growing calls for rate hikes and an expanding hawkish faction within the Bank of Japan (BOJ), one traditionally dovish policymaker has maintained a neutral stance.

On Thursday, November 27, BOJ board member Asahi Noguchi told business leaders in Oita Prefecture that the central bank must "carefully examine how various economic channels ultimately affect economic activity and prices, and use policy rates as a tool to adjust the degree of monetary easing as appropriate." His remarks did not add momentum to mounting speculation about a December rate hike but instead emphasized the importance of acting at the right time.

Noguchi’s comments drew attention as they followed recent hawkish signals from several colleagues, which had pushed market expectations for a December hike to elevated levels. His more neutral stance appears to help the BOJ avoid being locked into a December move, preserving flexibility in policy decisions.

Market expectations for the BOJ’s next move remain divided. According to overnight swap index data, traders see a roughly 53% chance of a rate hike from the current 0.5% at the December 19 meeting. However, they assign an 86% probability of a hike by January, suggesting investors are shifting expectations from December to early next year.

**Gradual Rate Hike Path Outlined** In his speech, Noguchi outlined his preferred policy approach, stating that the most realistic method would be to set a benchmark range for the neutral rate and then "gradually raise interest rates over time while monitoring their impact on the economy and prices."

"I believe this is the prudent, step-by-step approach to policy adjustments that the BOJ should pursue," said the former economics professor. He also warned that "moving too fast or too slow in adjusting policy could both pose problems." His view aligns with the BOJ’s long-term forecast of achieving its price target in the latter half of its three-year projection period ending in March 2028. Noguchi suggested that if this outlook materializes, the BOJ should adjust rates at an appropriate pace to match the timeline.

**Policy Debate Amid Growing Hawkish Influence** Before Noguchi’s remarks, market expectations for a December hike had been rising. Last week, comments from BOJ board members Junko Koeda and Kazuyuki Masu fueled speculation about a move next month. Koeda stated that the BOJ should further normalize policy but did not hint at timing, while Masu said in an interview that the timing for a hike was approaching.

These developments suggest that at least four of the BOJ’s nine board members are now prepared to support a rate hike, after two dissented against holding rates steady in September and October. Against this backdrop, Noguchi’s neutral stance proves crucial, revealing ongoing internal debates over the timing and pace of tightening.