The Bank of Japan released minutes today from its 30 to 31 July meeting, where the board held its rate at 1.0% by an 8-1 vote. The lone dissenter called for an immediate move to 1.25%, the exact level the BOJ adopted two months later in September.
The Bank of Japan's July minutes, published today, show board member Hajime Takata cast the sole dissenting vote at the 30 to 31 July meeting, pushing for an immediate rate rise to 1.25% while the rest of the board voted 8-1 to hold near 1.0%. Takata argued Japan had entered a phase requiring a more nimble policy response to upside inflation risks and shifting overseas financial conditions. The July summary of opinions described those risks as significantly skewed to the upside, citing yen weakness, geopolitical tensions, crude oil costs and AI-driven demand, and one unnamed member warned the pace of hikes could exceed market expectations.
September delivers the hike Takata called for
That warning played out fast. At its 17 to 18 September meeting, the BOJ raised its policy rate to 1.25%, the highest level since 1995, with members Toichiro Asada and Ayano Sato dissenting in a 7-2 vote in favour of holding steady. Governor Kazuo Ueda kept the future path deliberately open at the press conference. Ueda said: "there could be various possibilities" and that the board shouldn't rule anything out, while also cautioning against tightening too quickly.
Yen weakens despite the hike
Rather than strengthening, the yen weakened further after the hike, with USD/JPY pushing past 157. The split vote and Ueda's lack of hawkish guidance disappointed traders positioned for a firmer signal on future tightening. With US rates still well above Japan's even after the move to 1.25%, the yen carry trade remains largely intact.
Ten-year Japanese government bond yields fell on the dovish framing, while the Nikkei 225 rose 1.5% as equity investors welcomed signs the BOJ would not tighten aggressively from here. Core inflation eased to 1.7% in August from 1.8% in July, adding to the more benign read.
Today's minutes function less as a forward-looking signal than as confirmation of how close the July board came to moving early, and how right its most hawkish member turned out to be.
Source: InvestingLive
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