Nikkei reports that after 15 years and 7 months, the inflation rate target has exceeded 2% and it is inevitable to raise interest rates to 0.25%. The monthly government bond purchases will also be reduced from 6 trillion yen to 3 trillion yen by the end of next year. According to Nikkei, the Bank of Japan is likely to raise its current policy interest rate of 0~0.1% to 0.25% at the policy decision meeting on the 31st local time. Despite lifting the negative interest rate in March, the Bank of Japan is considering the rate hike due to ongoing economic growth and wage increases driving inflation. The Bank of Japan is expected to present concrete plans for quantitative easing by reducing government bond purchases.
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, according to Nikkei, the Bank of Japan will discuss the possibility of further interest rate hikes at the policy decision meeting. If the policy rate is raised to 0.25%, it will be the first time since around December 2008 (around 0.3%) after 15 years and 7 months that it returns to the 0.25% level.
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, The reason behind the Bank of Japan’s consideration for additional rate hikes following March is the continued rise in inflation, surpassing the 2% target. The consumer price index in June (excluding fresh food) rose by 2.6% year-on-year, surpassing 2% for the 27th consecutive month.
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, Nikkei reported that the Bank of Japan is likely to officially decide on reducing quantitative easing by shrinking the government bond purchase plan at this meeting. Despite lifting the negative interest rate in March, the Bank of Japan has been purchasing around 6 trillion yen worth of government bonds each month. However, it is believed that the market expects the amount of purchases to be reduced to around 3 trillion yen by the end of next year.
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, Since 2013, the Bank of Japan has been engaged in large-scale quantitative easing. As of the end of March, it held 53% of outstanding government bonds and has been controlling long-term interest rates.
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, Governor Kuroda Haruhiko previously stated at a press conference after the June policy decision meeting that if inflation continues as expected, the Bank of Japan will “raise policy rates and adjust the degree of monetary easing.”
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