The BOJ raised its policy rate by 0.25 percentage points to approximately 1.25% at its September monetary policy meeting. The BOJ's rate-hike pace may accelerate further, and Nomura Securities' Okazaki Kohei (岡崎康平) explains the background and risk scenarios.
Since beginning to raise rates in 2024, the BOJ had raised them by 0.25 percentage points every 6 months as a benchmark. In 2026, however, it implemented rate hikes at both the June and September meetings, bringing the pace closer to approximately once every 3 months. The possibility of further rate hikes remains.
Nomura Securities' Okazaki Kohei (岡崎康平) cited the current approach of underlying inflation to 2% as a factor behind the faster pace of rate hikes, and pointed out the need for future policy operations to take into account not only prices but also the overall financial environment. A base-case scenario has been presented that envisages additional rate hikes in December and March between the end of 2026 and early 2027.
There are views that an expected reacceleration in core CPI and the impact of energy prices will affect future developments, and that the BOJ needs to strengthen monetary policy to keep inflation at 2%. It has also been pointed out that if accommodative financial conditions persist, the BOJ may need to adjust the degree of accommodation through rate hikes.
Overall, while there are views that the BOJ's rate-hike pace is accelerating, monetary policy operations are expected to remain flexible in response to movements in the yen and changes in global financial conditions.