BOJ Minutes Show the Board Discussed Faster Hikes After a 7-2 Vote for a 1.25% Rate

Photo: Syced, Wikimedia Commons, CC0 (file photo, August 2026). A stone sign at the north gate of the Bank of Japan head office in Tokyo.

Bank of Japan policymakers discussed raising interest rates faster if prices began running ahead of the bank’s goal, according to minutes of their Sept. 17-18 meeting, when the board voted 7-2 to lift its short-term rate to around 1.25%. The BOJ released the minutes at 8:50 a.m. Tokyo time on Thursday, Nov. 5, which was 6:50 p.m. Wednesday ET. The September increase took the rate to its highest level in 31 years, Reuters reported.

The minutes add support to expectations of another hike in December. A Reuters poll found that many analysts expect the BOJ to raise its rate to 1.5% that month.

What the minutes say about faster hikes

Board members agreed that, with underlying inflation “approaching 2 percent” and financial conditions still loose, the bank should “continue to raise the policy interest rate and adjust the degree of monetary accommodation.” Several members went further and spoke about speed.

One member said that “if signs of an upward deviation in prices were observed, the Bank would need to accelerate the pace of rate hikes.” Another said it was “desirable” to bring the rate “closer to the approximate goal relatively soon,” leaving room to move nimbly in either direction. A third said the bank should keep acting “in a timely manner without becoming overly cautious,” while widening its analysis of price risks.

Most members said the economy and prices were developing “generally in line” with the outlook the bank published in July. They expected core consumer inflation, which excludes fresh food, to rise to a level “clearly above 2 percent” from the second half of fiscal 2026, the six months that began in October. They pointed to the pass-through of wage gains into prices and to higher crude oil prices linked to the conflict in the Middle East.

One member also estimated the effect of the government’s planned cut in the consumption tax on food. Assuming the cut is fully passed on to prices, that member said it would lower the year-on-year change in consumer prices for fiscal 2027 by more than 1 percentage point. TBR has reported on the food consumption-tax bill now before the Diet.

The two dissents

Board members Toichiro Asada and Ayano Sato voted against the hike. Asada argued that with core inflation recently below 2%, the economy could not necessarily be called strong, and the bank should leave rates unchanged. Sato said economic and price trends did not appear to have sped up meaningfully, so a hike was not appropriate at that meeting.

By the numbers: rate path and expectations

Before September, the policy rate stood at around 1.0% after a hike in June. Reuters noted that the gap between the June and September moves was shorter than the roughly twice-a-year pace of 2024 and 2025. At its Oct. 29-30 meeting, the BOJ kept the rate at 1.25% but signaled that it was watching inflation risks closely, which cemented market bets on a December move, Reuters said. In October, the bank also said underlying inflation had reached a level broadly consistent with its 2% target, Nikkei reported.

The bigger debate is how high the rate will go. BOJ staff estimate Japan’s nominal neutral rate, the level that neither speeds up nor slows the economy, at 1.1% to 2.5%, according to Reuters. Analysts in the Reuters poll put the eventual peak, or terminal rate, mostly at 1.75% to 2.0%.

The minutes show the board looking at market signals too. One member said a market gauge of the terminal rate, the two-year-forward one-year overnight index swap rate, had recently topped 2%. Another member said market expectations “appeared to be somewhat ahead” of the economy and of current wage and price trends. Many members agreed that the neutral rate is hard to pin down in advance and that the bank should keep raising rates while checking how earlier hikes are affecting financial conditions.

Services survey shows slower cost pressure

Separately on Thursday, S&P Global’s final Japan services purchasing managers’ index rose to 51.7 in October from 51.3 in September, Reuters reported. That marked a fifth straight month above the 50 line that separates growth from contraction, though it was below an early estimate of 52.0. Input-price inflation slowed for a fourth month, to an eight-month low. The composite index, which adds factories, eased to 52.1, its slowest growth since May.

“Whether growth loses further momentum and cost pressures ease will be important considerations for the Bank of Japan as it assesses further policy tightening,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.

Why it matters for U.S. readers

BOJ rate decisions feed into the yen’s value against the dollar, which affects costs for American travelers to Japan and for U.S. companies that buy from or sell to Japanese firms. Tokyo has already warned it could step into currency markets, as TBR reported in its story on Japan’s yen intervention warning.

What to watch

Governor Kazuo Ueda speaks at an International Monetary Fund seminar in Washington on Friday, Nov. 6. Asada, one of the two dissenters, gives a speech on Nov. 12. Board members Hajime Takata and Naoki Tamura, whom Reuters describes as hawkish, also speak this month. The next policy meeting is in December. More regional coverage is in TBR’s Asia-Pacific news section.

Sources

• Bank of Japan: Minutes of the Monetary Policy Meeting on Sept. 17 and 18, 2026 (PDF)
• Reuters via StreetInsider: BOJ debated need for more rate hikes, scope for faster moves, September minutes show
• Reuters via Investing.com: Japan services activity expands for fifth month, PMI shows
• Nikkei: BOJ September minutes (Japanese)

Additional sources

• Bank of Japan: 2026 minutes index
• The Japan Times: Bank of Japan’s 2% inflation-target victory fails to impress
• The Boston Report: Japan’s November price hikes