The Bank of Japan published Governor Kazuo Ueda’s press conference following the latest monetary policy meeting, at which the board raised its overnight call rate target from around 1% to around 1.25% by majority vote. The bank judged that economic and price developments remained broadly aligned with its central outlook, while higher oil prices, yen depreciation, strong artificial intelligence related demand and the pass-through of business costs to consumer prices had increased upside inflation risks. Two board members opposed the increase, citing weak economic conditions and insufficient acceleration in economic and price trends. Ueda said the policy phase had shifted from seeking to lift underlying inflation toward stabilizing it at around the 2% target. Financial conditions remain accommodative, and the bank expects to continue raising rates if the outlook is realized, but it has no preset timetable or terminal rate. Decisions will reflect symmetric upside and downside risks, including developments in the Middle East, artificial intelligence related demand and exchange rates. Ueda did not rule out consecutive increases or moves larger than 25 basis points if inflation conditions warrant them, while emphasizing the need to avoid abrupt tightening that could trigger sharp adjustments in lending or asset markets. The board also unanimously revised its climate response financing operation by linking its lending rate to the policy rate and setting a JPY 50 trillion cap. The changes are intended to preserve smooth monetary operations while maintaining support for private sector climate initiatives.
2026-09-24Bank of Japan
Bank of Japan raises policy rate to 1.25% as underlying inflation approaches 2%
The Bank of Japan raised its policy rate from around 1% to around 1.25% as underlying inflation approached its 2% target and upside risks increased. Governor Kazuo Ueda signaled further data-dependent increases, with no preset pace, and did not exclude consecutive or larger moves if inflation warrants them. The bank also moved its climate financing operation to a variable rate and set a JPY 50 trillion cap.