MNI BoJ Review-Sep 2025: Cautious But Signals Progress

EXECUTIVE SUMMARY: 

• Policy Decision & Dissents: The BOJ kept rates at 0.5%, but two members dissented in favour of a 25bp hike, arguing the price target is “more or less achieved” and rates should move “closer to neutral,” highlighting stronger hawkish voices within the board.
• Governor Ueda’s Tone: Ueda remained balanced, noting “underlying inflation is approaching 2%, but the 2% level has not yet been reached” and that there is “little sign of tariff having impact on Japan’s economy,” while emphasising ongoing global uncertainty and data dependency.
• Inflation & Growth Outlook: Core inflation remains above 3% with wage growth expected to keep inflation “floating above 2%.” Risks from tariffs are seen as contained, and potential supports include “Fed rate cuts,” “AI-related investment,” and “deregulation.”
• Rate Hike Timing & Risks: Views diverge—some expect a hike in October following the Tankan Survey and LDP leadership election, while others see January 2026 as the base case. Political risks (e.g., dovish LDP candidates) and Fed-driven yen appreciation could delay tightening.
• Asset Sales: The BOJ will gradually sell ¥330bn of ETFs and ¥5bn of J-REITs annually, a pace that would take “more than 100 years” to unwind holdings. The Bank aims to “avoid losses as much as possible” and limit market disruption, though acceleration remains possible.

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK:BOJ Review - Sep 2025.pdf