At its September meeting, the Bank of Japan raised the uncollateralized overnight call rate by 0.25% to 1.25%. The market responded with yen weakness, while the lack of a strongly hawkish tone and the reasons behind the dissenting vote left investors focused on assessing the likelihood of further rate hikes.
The Bank of Japan held its monetary policy meeting on 17–18 September and raised its target for the uncollateralized overnight call rate by 0.25% to 1.25%. The vote passed with 7 in favor and 2 against.
Policy Board member Asada (浅田), who voted against the hike, said that raising rates was inappropriate while current price trends remained below 2%.
The market reaction was reportedly one of yen weakness and dollar strength, with the yen weakening before and after the press conference. Going forward, assessment is expected to continue regarding the degree of monetary accommodation, including long-term interest rates, bank lending and asset markets.
The Bank of Japan recognizes the risk that inflation could exceed 2% from the second half of fiscal 2026 onward and has indicated the possibility of continuing to raise rates. However, some analysts believe that the outlook could change depending on other factors and future prospects.