The Bank of Japan raised its target for the short-term policy rate from around 1.0% to around 1.25% at its Monetary Policy Meeting. It said future decisions on the size and timing of rate hikes would be based on price and economic developments.
At its Monetary Policy Meeting on the 18th, the Bank of Japan decided by majority vote to raise its policy rate guidance target from around 1.0% to around 1.25%. The decision marked the first rate hike in 3 months. The BOJ judged that it needed to respond to the risk of inflation exceeding its 2% target due to the deterioration in the Middle East situation, which is driving up crude oil prices, the yen's weakening trend and expanding demand related to AI.
The new policy rate will be at its highest level in approximately 31 years, since 1995, and will apply from the 24th. Since ending large-scale monetary easing, including its negative interest rate policy, the BOJ had continued to raise rates roughly once every six months. This decision came 3 months after the previous hike in June, the shortest interval to date.
At a news conference following the decision, Governor Ueda Kazuo (植田 和男) explained that "the situation has changed" with regard to price developments and expressed the view that it was necessary to stabilize the underlying inflation rate at around 2%. The BOJ said it would adjust the degree of monetary easing in response to economic, price and financial conditions.
Regarding the possibility of rate hikes at 2 consecutive meetings or hikes exceeding 0.25%, Ueda Kazuo (植田 和男) said, "There are various possibilities depending on price developments. We cannot rule out any particular approach," indicating that the policy approach going forward had yet to be decided.