BOJ Governor Press Conference Shortly
The Bank of Japan (BOJ) implemented an additional interest rate hike just four months after ending its negative interest rate policy.
At the two-day Monetary Policy Meeting held until the 31st, the BOJ announced that it decided to raise the short-term policy interest rate from the current 0?0.1% to 0.25%. This marks the second rate increase about four months after the negative interest rate was lifted in March.
In its policy statement, the BOJ explained that from the perspective of continuous and stable achievement of the 2% price stability target, it judged that "adjusting the degree of monetary easing is appropriate." It also added that if future economic and price data confirm the BOJ’s forecasts, it will proceed with additional policy rate hikes.
Accordingly, Japan’s short-term interest rate reached its highest level in 15 years and 7 months since December 2007, right after the Lehman Brothers crisis. In the March meeting, the BOJ ended its negative interest rate policy by raising rates for the first time in 17 years, but it had maintained a freeze in the subsequent two meetings.
Among the nine BOJ policy board members at this meeting, two opposed the additional rate hike. Board member Nakamura Toyoaki pointed out the need to review corporate statistics and other data until the next meeting in September. Board member Noguchi Asahi also expressed opposition, citing the need to confirm improvements in economic conditions related to wage increases and to make a more cautious decision.
Additionally, the BOJ decided to reduce the amount of long-term government bond purchases, which was announced at last month’s meeting, from the current 6 trillion yen per month (approximately 54.3 trillion won) to 3 trillion yen (approximately 27.2 trillion won) in the first quarter of 2026, half the previous amount. This decision was made with unanimous approval from all nine policy board members. The plan is to reduce purchases by 400 billion yen quarterly in principle. As a result, the BOJ’s government bond holdings, currently around 600 trillion yen, are expected to decrease by 7?8% by March 2026. The BOJ also plans to conduct a mid-term evaluation in June 2025 during this process.
Along with this, the BOJ forecasted in the economic outlook revision report released on the same day that the consumer price index (CPI) excluding fresh food will reach around 2% by 2026. The CPI inflation forecast for 2024 was lowered by 0.3 percentage points to 2.5% from the previous forecast of 2.8%. The 2025 forecast was raised from 1.9% to 2.1%, while the 2026 forecast remained at 1.9%. The real GDP growth rate forecast for 2024 was lowered by 0.2 percentage points to 0.6%. The forecasts for 2025 and 2026 remained unchanged at 1.0% each.
Following the BOJ’s policy rate hike, the dollar-yen exchange rate fluctuated in the foreign exchange market on the same day. Immediately after the policy announcement, the dollar-yen rate dropped to the 151 yen level. The yen’s value rose as yen-buying movements spread due to the narrowing interest rate gap between the U.S. and Japan. However, it then surged sharply to the 153 yen level. As of 2:25 p.m. that day, the exchange rate was moving around 152.8 yen. The Nikkei 225 average stock price on the Tokyo Stock Exchange showed a slight upward trend ahead of the market close.
Meanwhile, BOJ Governor Ueda Kazuo is scheduled to attend a press conference at 3:30 p.m. on the same day to explain the background of the policy decision.
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