BoJ Summary of Opinions: Member highlights the importance of wages to future policy decision

Key quotes

One member emphasized checking initial momentum toward next year's wage talks as firms firm up plans after US tariffs set at 15%.

Future policy decision key to whether firms maintain positive wage-setting behaviour.

Uncertainty remains over outlook but Japan will see environment fall into place to adjust policy rate depending on economic, price outlook.

One member commented no need to hurry to increase interest rate but must raise without losing appropriate timing.

One member indicatesdconditions for advancing towards policy normalization are nearly met but need to assess the extent underlying inflation rate has become entrenched.

BoJ can shift policy if there is no negative news regarding global economy or markets and if BoJ can confirm firms active wage-setting behavior will be maintained.

Member suggested rate hike soon due to inflation risks, advises patience in assessing situation.

One member said timing to hike rates approaching but should wait a bit given uncertainty over US tariffs, direction of new Japan government policies

One member suggested BOJ raise rates closer to neutral to prevent rapid rate hikes in future.

One member said rate hike at current phase would be process of normalisation through which the BOJ can curb economic distortions in future.

One member suggests BOJ should shift communication to straightforward style, focusing on changes in headline inflation.

Fog surrounding Japan economic outlook has begun to clear compared with July.

One member said even if impact of US tariff becomes pronounced, expected scale of impact has become smaller than before.

Unlikely tariffs will cause more negative developments as US administration shifts to economy-boosting policies like tax cuts, deregulation.

One member: given real interest rates have been significantly negative, attention is warranted on developments in real estate prices.

Member discusses inflation expectations of firms, households reaching approximately 2%.

One member: more certainty BOJ's price target achieved, attention to upside price risks.

Market reaction

Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.27% on the day to trade at 153.83 as of writing.

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.