The BOJ expressed the view in its main opinions from the September meeting that it may have no choice but to accelerate the pace of rate hikes if signs of an upside surprise in prices emerge. Attention has again focused on issues surrounding future policy management and the market outlook.
At the BOJ’s September Monetary Policy Meeting, the view was expressed that the degree of monetary easing needs to be adjusted through further rate hikes if prices continue to move consistently with the 2% target and financial conditions remain accommodative. Some also argued that the market should be shown signs of upside price pressure in order to curb inflation.
The underlying inflation rate, excluding temporary factors, has come quite close to 2%, prompting the view that it should be closely monitored to prevent inflation expectations from becoming unanchored. Multiple board members continued to argue that the degree of monetary easing needs to be adjusted.
At the meeting held on 17 and 18 September, the policy rate was raised to 1.25%, its highest level in 31 years. The statement explicitly set out a policy of continuing to adjust the degree of monetary easing, and the Governor referred at a press conference to a shift in the policy phase.
In market developments, the interest-rate swap market is currently pricing in an approximately 21% chance of an October rate hike, with expectations extending through December. Statements from government officials also drew attention, and movements in the yen following the meeting appeared to be affected.