At its September meeting, the BOJ raised its policy rate from 1.00% to 1.25% and indicated that it intends to continue raising rates. The possibility of an additional rate hike later this year is being discussed.
At its monetary policy meeting on 17–18 September, the BOJ raised its policy rate from 1.00% to 1.25%. In its post-meeting statement, the BOJ indicated that it intends to continue raising rates on the assumption that financial conditions remain accommodative.
Regarding an additional rate hike later this year, the author analyzes that there is a high probability of a rate increase to 1.50% at the December meeting. The reasons cited include concerns over rising prices, the risk of yen depreciation resulting from a widening US-Japan interest rate differential, and pressure from the US government.
The BOJ is expected to have meetings remaining on 29–30 October and 17–18 December, with inflation trends and movements in interest rate differentials likely to be the focus in the short term. Three risk factors have been identified in response to changes in financial conditions: yen depreciation, fiscal uncertainty, and the impact of the situation in the Middle East on energy prices.
In the longer term, a phase of progress in curbing inflation is also anticipated, and some expect the current monetary tightening cycle to approach its final stage by mid-2027. Some have also indicated that the impact of the BOJ's rate hikes on corporate cash flow and private consumption will be limited, while financial-sector share prices may attract attention in the equity market.