The Bank of Japan voted 7–2 to lift its policy rate from 1.0% to 1.25%, effective September 24, as policymakers weighed rising underlying inflation against signs of economic weakness.
The September 18 decision also raises interest paid on banks’ BOJ reserves to 1.25%. The basic lending and discount rates will rise to 1.5%.
The two dissenters questioned whether inflation and economic activity justified tightening now. The majority pointed to wage increases feeding through to prices and the risk of inflation exceeding its 2% target.
In a separate unanimous decision, the BOJ changed its climate-finance programme to a floating interest rate tied to the average reserve-deposit rate during each loan’s term.
The programme’s ceiling is ¥50 trillion. Individual institutions can borrow against qualifying climate investments and loans, subject to a ¥10 trillion cap.
Similar rate changes apply to disaster-support and pooled-collateral lending. Existing loans retain their previous terms until maturity.
Further policy-rate increases remain possible, with timing dependent on economic data. The meeting’s Summary of Opinions is due October 1; minutes follow November 5.
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