The day banks become reluctant to lend, saying, “We can’t lend at this rate”: Conditions for the “end of rate hikes” come into focus after the BOJ declares that 2% has been reached

At its October Monetary Policy Meeting, the BOJ held its policy rate at 1.25%. The focus of the news was its declaration that “underlying inflation has reached 2%.” While this indicates an ongoing stance of additional rate hikes, it has also been pointed out that the next issue will be the timing of the end of rate hikes, or the normalization of financial conditions to a neutral level.

At the meeting, the BOJ decided to accelerate its annual ETF sales pace from approximately ¥330 billion to approximately ¥860 billion. Although this will not significantly shorten the time required to complete the sales, it is now expected that the unwinding of the unprecedented monetary easing will advance within the lifetimes of current employees.

The accelerated ETF sales policy may be adjusted further depending on market conditions, and the sales pace is considered likely to be reviewed again from next year onward. Meanwhile, the J-REIT sales pace was maintained.

Some view it as appropriate to conclude that the declaration of 2% attainment came too late, while others have pointed out that achieving the inflation target and reaching underlying inflation of 2% should be considered separately.