The Bank of Japan announced that it would leave its policy rate unchanged at around 1.25% at its October meeting. Meanwhile, many voices supported an early rate hike in December, and the Bank also decided to increase the pace of ETF sales.
In the Summary of Opinions published by the Bank of Japan on 29-30 October, the Bank indicated that it would leave its policy rate at around 1.25%, close to its current level. It also noted that Policy Board member Takada Hajime (高田 創) had proposed raising the rate to around 1.50%, but the proposal was rejected by a majority vote.
Some opinions called for a rate hike to be implemented when possible without excessive caution, while others said the pace of reaching the neutral rate should be accelerated. There were also indications that the neutral rate was higher than 1%, and opinions in favour of an early rate hike stood out.
On the other hand, some views held that the policy rate had already entered the estimated range for the neutral rate, while cautious opinions also called for attention to the risk that a rate hike could weigh on the economy and prices. The market is said to have priced in an approximately 80% probability of a rate hike at the next meeting in December, while the sustainability of wage increases in next year’s spring wage negotiations is also attracting attention as a factor.
At the meeting, the BOJ decided to accelerate the pace of sales of its holdings of exchange-traded funds (ETFs) to approximately ¥860 billion annually. As attention focuses on the BOJ’s communications, this is expected to be a factor influencing its decision at the next meeting.