BOJ minutes show 7-1 vote approved June rate rise; lone dissent flagged Middle East risks

Minutes published by the Bank of Japan on Wednesday showed the central bank’s June interest rate increase was approved by a 7-1 vote, with one board member dissenting over risks from the Middle East and another unsuccessfully arguing for a faster reduction in the BOJ’s government bond purchases.

The minutes, for the BOJ’s June 15-16 monetary policy meeting, showed the board voted 7-1 to change its guideline for money market operations so that “The Bank will encourage the uncollateralized overnight call rate to remain at around 1.0 percent.” The change took effect June 17. By the same 7-1 vote, the BOJ also raised the interest rate on its complementary deposit facility to 1.0% and set the basic discount rate and basic loan rate at 1.25%, also effective June 17.

The lone dissenter was board member Toichiro Asada. According to the minutes, Asada opposed the move “considering that, regarding the impact of the situation in the Middle East, downside risks to production and employment were greater than upside risks to prices.” His objection underscored how geopolitical uncertainty featured in the board’s discussion even as the BOJ judged that underlying consumer inflation was approaching its 2% goal and financial conditions remained accommodative.

The minutes also revealed disagreement over the pace of the BOJ’s retreat from large-scale bond buying. Board member Naoki Tamura proposed cutting monthly outright purchases of Japanese government bonds by about 200 billion yen each calendar quarter through January-March 2028, a faster taper than the plan the board ultimately adopted. That proposal was defeated, and the board instead approved the chairman’s more gradual schedule, with purchases set at about 2.7 trillion yen in April-June 2026, 2.5 trillion yen in July-September, 2.3 trillion yen in October-December, 2.1 trillion yen in January-March 2027, and about 2.0 trillion yen from April 2027 onward.

Before the June meeting, the BOJ’s guideline had been to keep the uncollateralized overnight call rate at around 0.75%. The move to 1.0% was described in market reports at the time as the BOJ’s highest short-term policy setting since the mid-1990s, marking another step in its gradual move away from years of ultra-easy monetary policy.

The BOJ published the minutes after they were approved at its July 30-31 meeting, with the English version embargoed until 8:50 a.m. Japan time on Aug. 5. The June meeting was held at BOJ headquarters in Tokyo on the afternoon of June 15 and the morning of June 16. Gov. Kazuo Ueda was absent, and Deputy Gov. Ryozo Himino chaired the meeting. The minutes said Ueda submitted a written opinion through the chairman, but did not disclose its contents.