BOJ Hikes Rates Again, Leaves Timing Open

The Bank of Japan (BOJ) raised its short-term policy rate from 1.00% to 1.25%, in a move that was widely anticipated by economists.

The decision, which passed with a 7-2 vote and takes effect on September 24, targets the uncollateralized overnight call rate and affects other interest rates such as the rate paid on eligible balances held at the central bank.

According to BOJ Governor Kazuo Ueda, there is no preset schedule for further increases, and the level of the neutral rate is difficult to identify. The central bank will assess policy at each meeting.

The increase in interest rates was driven by rising consumer inflation, which the BOJ expects to approach its 2% target. However, the dissenting votes expressed concerns that acting now may not be necessary.