The Bank of Japan raised its policy rate from 1.0% to 1.25% at a monetary policy meeting, signaling its priority of containing inflation. With high prices persisting, attention is also focused on the yen exchange rate and U.S. interest-rate trends, it has been reported.
Amid prolonged price increases, the Bank of Japan decided on an additional rate hike, accelerating the pace from the roughly once-every-six-months rate seen since March 2024 to once again in 3 months. The new policy rate is expected to be approximately 1.25%, and rate hikes have become more frequent since the lifting of the negative interest rate policy.
Corporate goods prices continued to rise at a high year-on-year rate in the 7% range for 3 consecutive months through August, as the movement to pass higher raw material costs on to prices has broadened. As a result, some have pointed to the risk that consumer price growth could exceed the 2% target.
The Board of Governors of the Federal Reserve System (FRB) raised its policy rate by 0.25% for the first time in 3 years and 2 months, setting the range at 3.75–4.0%. The Japan-U.S. interest-rate differential will not narrow, and attention must be paid to the impact on the yen exchange rate and trends in import prices.
Coordination with fiscal policy is important, and some have pointed out that the government's expansionary fiscal policy could undermine market confidence. The BOJ is therefore said to be required to balance price stability with economic conditions.