(Tokyo = Yonhap News) Correspondent Do-yeon Lee = The Bank of Japan, Japan's central bank, maintained the short-term policy interest rate, the base interest rate, at the current 'around 1.25%' at the financial policy decision meeting on the 30th.
According to Kyodo News and Nippon Keizai Shimbun, the Bank of Japan decided to freeze the base interest rate with the approval of a majority of policy committee members at a financial policy decision meeting held for two days from the previous day.
Among the committee members, deliberation committee member Hajime Takata reportedly opposed the freeze, suggesting an interest rate increase of 0.25 percentage points.
Bank of Japan Governor Kazuo Ueda explained the reason for freezing the base interest rate at a press conference that day, saying, "We judged that it was necessary to further monitor risks surrounding the economy and prices and trends in the financial environment."
At last month's meeting, the Bank of Japan raised the base interest rate by 0.25 percentage points from 'about 1%' to 'about 1.25%' due to concerns about inflation due to rising oil prices, the weakening yen, and the impact of increased demand related to artificial intelligence (AI). This is the highest level in 31 years since 1995.
Previously, the prevailing view in the market was that the Bank of Japan would freeze interest rates this month.
At this meeting, the Bank of Japan's judgment on prices was more of interest than whether to raise interest rates.
Through the 'Economic and Price Situation Outlook' report released on this day, the Bank of Japan officially stated that the basic inflation rate, excluding temporary fluctuation factors, is "generally at a consistent level" with the target of 2%.
This is interpreted to mean that the deflation of the Japanese economy that has lasted for more than 30 years has virtually ended, and attention is being paid to whether it is a signal that further interest rate increases will be accelerated.
The Bank of Japan introduced a 2% inflation target in January 2013. Afterwards, early achievement was pursued through large-scale financial easing, including the purchase of government bonds, but the goal was reached only after 13 years.
Recently, prices have continued to rise as cost increases, such as the rise in crude oil prices due to the situation in the Middle East, and increased demand due to wage increases overlap.
However, regarding achieving the goal, Governor Ueda emphasized, “We have not yet reached the sustainable and stable realization of the 2% inflation rate,” and added, “Rather than waiting quietly, we will adjust financial policies appropriately to achieve this.”
He added, “We will not declare achievement at any point in time.”
The Bank of Japan emphasized, "In the future, it is important to confirm the degree of settlement at around 2% from the perspective of continuous and stable realization of the 'price stability target'."
At the same time, he announced his plan to continue raising the policy interest rate, saying, "Considering that the current monetary environment is easing, we will continue to raise the policy interest rate and adjust the degree of financial easing according to the economic, price, and financial situation."
However, the timing and speed of the interest rate increase will be determined by keeping an eye on the impact on the Japanese economy and prices of rising crude oil prices due to the situation in the Middle East, expansion of AI-related demand, and exchange rate fluctuations.
Governor Ueda said, "In addition to continuing to check trends in various indicators, we will look at the mechanism behind it, especially whether and to what extent the mid- to long-term expected inflation rate has settled at around 2% as an important factor. I think it is also very important to look at whether wage and price determination behavior is consistent with the 2% inflation rate."
There is growing speculation in the market that the Bank of Japan will raise interest rates again in December, the next financial policy meeting.
Meanwhile, the Bank of Japan adjusted the real gross domestic product (GDP) growth rate for 2026 to 0.7%, 0.1 percentage points higher than the previous forecast.
Regarding the background, he explained that energy and raw material prices are expected to rise due to the situation in the Middle East, which will exert downward pressure on the economy, but that in addition to the increase in global AI-related demand, various government policies and an easing financial environment are expected to support the economy.
Meanwhile, the Bank of Japan decided on this day to increase the speed of selling exchange-traded funds (ETFs) it had purchased while promoting financial easing by 2.6 times from January next year.
As a result, the annual sales volume based on book value increases from the existing approximately 330 billion yen (2.8 trillion won) to approximately 860 billion yen (7.3 trillion won), and based on market value, the annual sales volume becomes 2.46 trillion yen (approximately 20.8 trillion won). The time it takes to complete the sale is expected to be shortened from 112 years to 43 years.
