Bank of Japan Governor Kazuo Ueda said at a press conference following the monetary policy meeting on the 18th that the policy "phase has changed" as underlying inflation approaches 2%, and set anchoring inflation at the 2% target as a challenge for policy management. After this rate hike, following the one in June, the BOJ maintained the wording in its statement that financial conditions are "accommodative," and strong caution is emerging over the fact that the assessment of financial conditions has not changed despite repeated rate increases. Even after the policy rate was raised to 1% in June, financial conditions have not changed significantly, and real interest rates adjusted for expected inflation remain in negative territory at the one- and two-year horizons, while rising stock prices and a weak yen are also part of the accommodative financial environment. With this rate hike, the policy rate has exceeded the lower bound of the estimated range of 1.1% to 2.5% for the neutral rate based on the BOJ's estimate of the natural rate of interest, but some believe there is still a distance to the actual neutral rate. Regarding the possibility of a rate hike exceeding 25 basis points, Governor Ueda said "various possibilities exist depending on the inflation situation," and explained that "we cannot decide in advance to rule out a particular approach."
BOJ hikes policy rate to 1% and signals further hikes possible, pushing JGB 10Y yields up.
