Against the backdrop of underlying inflation reaching 2%, the Bank of Japan is considering a policy of looking to raise rates every 3–4 months and move them closer to the neutral rate. A policy change is expected to be in view at the next meeting in December.
With underlying inflation reaching 2%, the Bank of Japan's monetary policy is shifting its focus toward curbing inflation. Amid strong upward pressure on prices from higher crude oil prices, rising import prices due to the weaker yen and rapidly expanding AI-related demand, the Bank aims to raise the policy rate to the neutral rate, which neither stimulates nor restrains economic activity.
Rate hikes are expected once every 3–4 months, putting a policy change at the next December meeting in view. At the meeting, Policy Board member Hajime Takata (高田創) proposed accelerating the pace of bringing the policy rate closer to the neutral rate, but the proposal was voted down by a majority at the meeting.
The market is expected to price in two rate hikes by next spring. The Bank of Japan explained that it would approach the neutral rate while gradually assessing the cumulative effects of previous rate hikes. Governor Ueda emphasized the need for ongoing reviews of policy decisions.