Goldman Sachs Japan: Bank of Japan Hikes 25bp to 1.25%; Further Tightening Ahead, But No Clear Sign of Acceleration
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Abstract
As widely expected, the Bank of Japan raised the policy rate on overnight call (TONA) by 25bp to 1.25% at its September 17-18 meeting, on a 7-2 vote; Asada and Sato dissented, preferring to hold. The rate now sits within the BOJ's 1.1-2.5% neutral-rate estimate range, yet the statement retained language that financial conditions should remain accommodative and that the BOJ will continue raising the policy rate while adjusting monetary easing—implying room for further hikes toward neutral but no clear signal of acceleration.
The September statement carried forward the view, held since June, that underlying CPI inflation risks skewing to the upside relative to the 2% price-stability target, and kept the Middle East situation, AI-related demand and yen weakness listed as upside price risks warranting attention. The overall economic assessment matched the July Outlook Report—a moderate recovery despite weakness in some areas—with component assessments broadly unchanged. The next checkpoint is Governor Ueda's press conference from 15:30 JST; Goldman Sachs assumes he does not view the BOJ as behind the curve and expects little change from July.