BoJ Minutes: Current real interest rates are very low, will hike if data indicates

Key quotes

Members agreed high uncertainty on trade policy developments, impact on economy.

Some members maintained current monetary policy to scrutinise trade policy impact on domestic, overseas economy, prices.

One member stated BOJ should bolster economy with monetary policy, which will likely stall temporarily due to impact of US tariffs.

One member said it won't be too late to look a bit more at hard data in proceeding with rate normalisation

Another member said conditions for rate hike gradually falling into place, but should avoid surprising markets by hiking rates now.

Another member mentioned it may be good time to resume rate hike as over half year has passed since last hike, though can hold for now due to lack of clarity on degree of slowdown in US.

One member said important to predict with some certainty, based on corporate profits and pre-information on wage negotiations, that wage-hike trend seen in past few won't be disrupted.

One member suggested BOJ should adjust level of interest rate at set pace, wide range of information will be available from now on including corporate first-half earnings, their outlook for full.

One member said waiting on rate hike could increase visibility on US economic outlook, but cost of doing so will gradually increase.

Few members weigh cost, benefit of waiting; BOJ needs to consider Japan's prolonged experience with deflation.

One member said it’s appropriate to maintain easy monetary conditions for as long as possible when anchoring of inflation expectations insufficient.

Some members noted exporters' profits have buffers against impact of US tariffs built up from past few years of weak yen.

One member said US tariff impact smaller than expected, likely won't derail Japan's economy.

Market reaction to the BoJ Minutes

At the time of writing, USD/JPY is down 0.43% on the day at 153.53.

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.