The Bank of Japan, or BOJ, released a summary of board members' opinions from its September meeting, in which one member noted the need to accelerate the pace of interest rate increases if there are signs that domestic inflation is rising significantly faster. Other members also called for rate hikes, citing inflation risks. At the meeting held on September 17-18, the board raised the policy rate to 1.25%, the highest level in 31 years, as widely expected by the market. The increase came just three months after the hike at the previous meeting, marking an end to a cycle of rate increases spaced roughly six months apart since the BOJ ended its negative interest rate policy in March 2024. Kyodo News reported that at the September meeting, two of the BOJ's nine board members opposed the decision to raise rates, while some market investors expect the BOJ to raise rates again at its next meeting in October. In addition, another member called on the BOJ to take into account the effects of exchange rates, since the BOJ needs to show the market its determination to prevent prices from deviating upward, through flexible responses to overseas economic conditions and price movements.
BOJ board signals support for faster rate hikes and already raised the policy rate to 1.25%, pushing JGB 10Y yields up.
BOJ rate hikes and hawkish board opinions strengthen the yen versus the dollar.
