At its monetary policy meeting on the 18th, the Bank of Japan decided by a 7-to-2 majority vote to raise the target for the uncollateralized overnight call rate, its policy rate, from around 1.0% to around 1.25%. Board members Toichiro Asada and Ayano Sato opposed the rate hike. At a press conference after the meeting, BOJ Governor Kazuo Ueda said the financial environment remains accommodative even after this rate increase, and stated that with the underlying rate of inflation approaching 2%, the central bank will continue to raise interest rates in line with economic, price, and financial conditions. On the timing and pace of further hikes, he repeatedly said the bank will consider them while examining the certainty and risks of its central economic and price outlook being realized, including the impact of the situation in the Middle East, expanding demand related to artificial intelligence, and fluctuations in foreign exchange rates. Ueda noted that while the short-term policy aim had been to push the underlying inflation rate up toward 2%, it is now approaching that level, and explained that it is important to ensure upside risks to prices do not materialize and adversely affect the economy, adding that 'the policy phase has changed.' He said that although board members Hajime Takata and Naoki Tamura, who are seen by the market as hawkish, will leave their posts next July, the bank basically does not take that into account when deciding the pace of its decisions.
BOJ raises its policy rate to ~1.25% and signals further hikes, pushing JGB yields higher.
