NEW DELHI, November 8: The Bank of Japan raised its policy rate to 1.25% in September on a 7–2 vote because most board members judged that underlying inflation was approaching its 2% target and that risks to prices were tilted upward, according to minutes of the September 17–18 meeting released on November 5. The minutes also record that the yen had strengthened before the meeting mainly because of coordinated foreign exchange intervention by Japan and the United States.
Key highlights
- Decision: the overnight call rate target was raised to around 1.25%, from around 1.0%.
- Vote: 7–2; board members Toichiro Asada and Ayano Sato voted against.
- Reasoning: most members said underlying CPI inflation was approaching 2%, with business-to-business price rises spilling into consumer prices and wage increases being passed on.
- Risks named: the situation in the Middle East, AI-related demand and currency moves.
- Currency: the yen had risen against the dollar and euro, mainly on coordinated Japan–US intervention and views on Japan’s monetary policy.
| Board member | Vote on raising the rate to 1.25% |
|---|---|
| Kazuo Ueda (Governor) | For |
| Ryozo Himino (Deputy Governor) | For |
| Shinichi Uchida (Deputy Governor) | For |
| Hajime Takata | For |
| Naoki Tamura | For |
| Junko Koeda | For |
| Kazuyuki Masu | For |
| Toichiro Asada | Against |
| Ayano Sato | Against |
Why the majority voted to raise
The minutes say most members found that economic activity and prices had developed “generally in line” with the Bank’s July outlook and that underlying inflation had been approaching 2%, as medium- to long-term inflation expectations kept rising. They agreed financial conditions were accommodative, pointing to low real interest rates, rising demand for funds and banks’ proactive lending. One member said a hike was appropriate because developments were “largely on track” and the factors the Bank had been watching, the Middle East, AI-related demand and exchange rates, still warranted attention.
Why two members dissented
Mr Asada argued that, with consumer price inflation excluding fresh food recently below 2%, the economy could not necessarily be called strong, so the Bank should keep rates unchanged. Ms Sato said economic and price developments did not appear to have accelerated substantially and that raising rates was not appropriate at that time.
The government’s view
The Finance Ministry’s representative said the government expected the Bank to make an appropriate decision, explain its intentions carefully to markets and examine the effect of the rate change on the economy and prices.
Our calculation
- The September move added 0.25 percentage points, taking the policy rate from about 1.0% to about 1.25%.
- Two of nine board members (22%) opposed the hike.
- The Bank then held the rate at 1.25% at its next meeting in October, as covered in our report on that decision.
What it means for India and Asia
Japan is moving steadily away from decades of near-zero interest rates. Higher Japanese rates can draw money back home from other Asian markets and support the yen, which affects the cost of Japanese loans and investment for countries including India. The reference to coordinated US–Japan currency intervention is notable because joint action of this kind has been rare historically and points to shared concern in Tokyo and Washington about currency moves.
What to watch
- The Bank of Japan’s next policy meeting in December.
- Whether more board members join the dissenters if inflation slows.
- Further statements from Tokyo and Washington on the yen.
The Bank of Japan head office in Tokyo. Image: katorisi, CC BY-SA 3.0, via Wikimedia Commons. Photo source · Licence
Sources
The Business Desk covers markets, the economy, companies and personal finance. Stories are checked against at least two credible sources before publication.
