The Bank of Japan raised its policy rate by 0.25 percentage points to around 1.25% at its monetary policy meeting. The 7-2 vote highlighted the push to normalize monetary policy against a backdrop of rising price pressures and yen depreciation. Attention is now focused on the timing of further rate hikes and comments from Governor Ueda (植田).
At its monetary policy meeting, the Bank of Japan decided to raise its policy rate by 0.25 percentage points from around 1.00% to around 1.25%. The decision was approved by a majority vote of 7 in favor and 2 against, marking the first rate hike in three months, since June. The 1.25% rate is the highest level since April 1995.
The latest rate hike is positioned as part of the normalization of monetary policy in response to inflation risks driven by factors including higher crude oil prices and yen depreciation. Core CPI rose 1.7% year on year in August, while overall CPI increased 1.9%.
Since ending its negative interest rate policy in March 2024, the Bank of Japan has raised rates in stages, from 0.25% in July 2024 to 0.50% in January 2025, 0.75% in December 2025 and 1.00% in June 2026, reaching 1.25% with the latest hike.
The next meeting is scheduled for 29-30 October, and the timing and pace of further rate hikes are expected to be the focus of market attention. Governor Ueda (植田)'s press conference, scheduled to begin at 15:30, is also expected to be an important market factor.