The BOJ raised its policy rate to 1.25% at its September meeting, and it was recognised that the underlying rate of inflation risked rising above the 2% target, with a shared view that the policy phase had changed. The rate hike was decided by a majority vote, with 7 in favour and 2 against.
The BOJ published on the 5th the minutes of its monetary policy meeting held on 17 and 18 September. Most policy board members recognised that there was a risk that the underlying rate of inflation would rise above the 2% target, and reportedly agreed that the rate hike was appropriate. It was indicated that the direction of policy had consequently shifted from maintaining the status quo towards raising rates.
Several members included asset price trends among the factors considered and expressed the view that financial conditions had become more accommodative in light of factors such as rising share prices and yen depreciation. There was also a view that if signs of higher-than-expected inflation emerged, it could become necessary to accelerate the pace of rate hikes.
Meanwhile, some members continued to argue for maintaining the status quo, as in June, and it was pointed out that rate increases should be restrained because of concerns about their effects on production, employment and income. Ultimately, the rate hike was decided by a majority vote, with 7 in favour and 2 against.
The decision at this meeting and the publication of the minutes indicate that the BOJ recognises a change in the policy phase, and policy management will be closely watched depending on future economic and price developments.