BOJ Governor Ueda (植田) has indicated that the central bank will prioritize anchoring inflation at 2% while remaining alert to upside risks and considering policy adjustments. At the monetary policy meeting held at the same time, the BOJ confirmed its policy of keeping the rate at around 1.25%.
BOJ Governor Ueda (植田) said that he broadly assessed the underlying inflation rate as being at a level approaching 2%, but indicated that inflation had not yet become sustainably and stably anchored. He said the focus would now shift to confirming that inflation becomes anchored at this level, while continuing to prioritize the movement toward bringing prices up to the target level.
At the monetary policy meeting held that day, the BOJ decided by majority vote to keep its policy rate at around 1.25%. As a rate hike had only recently been implemented, the BOJ deferred an additional hike, citing the need to assess its impact on economic and price conditions and corporate lending, and indicated that it would monitor the effects of the previous change.
In its Outlook for Economic Activity and Prices, the BOJ revised its wording on underlying inflation in relation to the previous expression of “2%,” assessing it as being at a “level broadly consistent” with the target. Underlying inflation was expected to remain at a similar level, making assessment of inflation’s sustainability and risks a central pillar of policy decisions.
With regard to the inflation outlook, vigilance over upside risks was cited as an important issue, with attention drawn to factors including higher crude oil prices stemming from tensions in the Middle East, yen depreciation and expanding AI demand. Governor Ueda (植田) indicated that the BOJ would take care to prevent an upside surprise in inflation from adversely affecting the economy and would adjust the degree of monetary easing at an appropriate time.
The decision to hold rates was not considered to mean the “end of the rate-hike path,” and the BOJ emphasized its stance of considering whether to implement additional rate hikes, including at its next meeting. Its policy is to assess the sustainability of inflation and upside risks before deciding on a change, rather than making policy decisions solely on the assessment that inflation has reached the target.