BoJ hikes; we think decision lack hawkish impact given 7-2 vote · 【 Fixed Income Commentary - Monetary Policy Navigator 】

Key arguments

• The hike rests on the BoJ's judgment that the July Outlook baseline is becoming more likely, not on new upside factors, and guidance was carried over unchanged without hinting at an end or acceleration of hikes.
• Without unusual US pressure, the BoJ would have been unlikely to hike again at this juncture; MoF and US Treasury concern over yen weakness was a major factor.
• The Takaichi administration's cautious stance is largely unchanged, as shown by the two cabinet-appointed dissenters and the retention of Minister Kiuchi.
• The climate response operation revamp—floating loan rate, JPY50tn total cap and JPY10tn per-counterparty ceiling—signals the operations are not open-ended and matters for balance sheet policy.

Corresponding source evidence

1. The vote was 7-2, with Toichiro Asada and Ayano Sato dissenting in favor of keeping the rate on hold.
2. In particular, the perspective of stabilizing underlying CPI inflation at a level around 2 percent becomes important in order to keep the risk of underlying CPI inflation deviating upward to a level above the price stability target of 2 percent from materializing and thereby exerting an adverse impact on the economy afterward.
3. With the price stability target of 2 percent, the Bank will conduct monetary policy as appropriate from the perspective of sustainable and stable achievement of the target.