BoJ Minutes: Members agree will continue to raise rates if its economic projection materialize

Key quotes

One member said the risk of waiting another meeting to raise rates would be risky given impact of forex on inflation.

One member stated if real rates deviate from equilibrium for long, that could affect long-term economic growth.

One member said appropriate to adjust degree of monetary support since Japan's real policy rate is extremely low by global standards.

Members shared view monetary conditions will remain accommodative although BOJ pushes up rates at this meeting.

A few members said real interest rate would be deeply negative even after BOJ raises rates to 0.75%.

One member said must scrutinize pros and cons of rate hike and its impact on households and consumption.

Members agreed BOJ will likely continue raising rates if its economic and price projections materialize.

A few members said adjusting degree of monetary support will help stabilise markets and have merits to economy.

Most members said BOJ should not have a preset idea on rate-hike pace, must scrutinize economy, prices and markets when making decision at each meeting.

One member said BOJ should assess various factors, including surveys, when judging whether cycle of moderate rises in wages and inflation is becoming embedded in Japan's economy.

One member said BOJ should raise rates at a pace of once every few months for the time being.

Market reaction to the BoJ Minutes

At the time of writing, USD/JPY is down 1.04% on the day at 152.48.

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.