The BOJ indicated that it would accelerate the pace of selling ETFs while keeping its policy rate unchanged, and Governor Ueda's remarks confirmed a stance of continuing with rate hikes. Additional rate hikes are expected in December this year and in March and June next year.
The BOJ held a Monetary Policy Meeting on 29 and 30 October and decided to keep the target for the uncollateralized overnight call rate at around the current level of 1.25%. A proposal by Policy Board member Hajime Takata to raise the target to around 1.50% was rejected by a majority vote.
The BOJ indicated that it would accelerate the pace of selling the exchange-traded funds (ETFs) it holds. However, ETF sales are expected to remain at around 0.1% of total market trading value, so their impact on the market is considered limited.
Governor Ueda pointed out that while the underlying inflation rate is at a level broadly consistent with the 2% target, the increased momentum in wage and price-setting behavior creates a risk of higher inflation over the medium to long term. He said the timing and pace of adjustments to the degree of monetary easing would be determined in line with future economic and price developments.
We maintain our view that the timing of an additional 25-basis-point rate hike will be December this year, followed by March and June next year. Market pricing has been fluctuating amid renewed concerns related to AI, but the policy stance is to adjust monetary policy as appropriate so that it reaches the target level.