Bank of Japan Hikes Overnight Call Rate Target to 1.25%
The Bank of Japan has raised its uncollateralized overnight call rate target from around 1.0% to 1.25%. This decision was made by the Policy Board, which cited progress toward achieving its 2% inflation target and continued accommodative financial conditions.
Japan's economy is showing signs of moderate recovery, despite some weakness due to the conflict in the Middle East. Higher crude oil prices have weighed on economic activity and household purchasing power, but government support measures, accommodative financial conditions, and strong global AI-related demand continue to support growth.
The Bank expects the economy to continue growing moderately, despite temporary headwinds from higher energy prices. Inflationary pressures have strengthened since the July meeting, with consumer price inflation (excluding fresh food) in the 1.5% to 2.0% range. The Bank will continue to raise the policy interest rate and adjust monetary accommodation as warranted by developments in economic activity, inflation, and financial conditions.