The Bank of Japan signaled further rate hikes after implementing a record increase. The decision was driven by rising inflationary pressure from surging crude oil prices, as well as the outlook for wage growth and medium- to long-term inflation expectations.
The Bank of Japan (BOJ) raised its policy rate to its highest level in 31 years, explaining that policymakers had not ruled out multiple possibilities regarding the scale or frequency of future rate hikes. Although markets had already priced in the decision, the yen fell in response.
BOJ Governor Ueda (植田) indicated that the short-term policy focus would shift from curbing accelerating inflation to ensuring that underlying inflation stabilizes within the 2% target range. 2 policy board members called for caution to prevent excessive monetary tightening, expressing differing views.
At the same time, the BOJ emphasized its intention to avoid extreme price surges in light of past responses in the United States and Europe, and pointed out that energy-price factors and increased spending in the artificial intelligence sector were having a modest impact on economic growth and inflationary pressure.
The pace of future interest-rate moves and the level of the neutral interest rate are expected to be assessed continuously based on upcoming economic data and the Bank of Japan's October Outlook for Economic Activity and Prices.
The BOJ's latest precautionary measure is intended to maintain price stability without undermining Japan's economic recovery.