At its meeting on the 29th and 30th, the BOJ left the policy rate unchanged at approximately 1.25% and indicated that it would accelerate the ETF sales pace to 2.6 times the previous rate. While the Outlook Report recognized for the first time that underlying inflation had reached 2%, the BOJ remained cautious in deciding on additional rate hikes.
The BOJ approved by 8 votes to 1 a decision to maintain the operating target for the uncollateralized overnight call rate at approximately 1.25%. The decision appears to have been based on the view that the Bank was assessing the effects of the previous rate hike. Board member Takada proposed a rate hike to 1.50%, but the vote was split.
The Bank unanimously decided to significantly accelerate the pace of market sales of ETFs as part of its efforts to shrink its assets. This indicated an intention to pursue monetary normalization, based on the fact that the market impact had been limited in the past.
For the first time, the Outlook Report determined that the underlying rate of price increases had reached a level broadly consistent with the 2% target. While acknowledging a virtuous cycle between wages and prices, the BOJ indicated that it would remain alert to upside risks to prices.
In the market immediately after the announcement, dollar-yen temporarily moved toward a stronger yen to ¥157.12, but later traded in a range amid after-hours interest-rate movements and Governor Ueda's explanation following the press conference. Selling prevailed in the stock market, particularly in AI-related stocks, and broad-based declines were seen.