The Bank of Japan kept its rate at 1.25%. Will it wait again on 18 December?
Japan's central bank kept its rate at 1.25% on 30 October, by eight votes to one. Its board meets again on 17 and 18 December.
What happened
On the Policy Board of the Bank of Japan decided, by an 8-1 majority vote, to keep its overnight interest rate at around 1.25 percent.
The Bank of Japan kept its main interest rate at 1.25% on . Eight board members voted for this and one against. Hajime Takata wanted a rise to 1.5%, because he said underlying inflation had already reached the bank’s 2% goal.
The pause came after two rises this year. The bank raised its rate to 1.0% on and to 1.25% on , with a pause on in between. In September two members, Toichiro Asada and Ayano Sato, voted against the rise.
In its report on , the bank said underlying inflation is now “at a level that is generally consistent with the price stability target of 2 percent”. It also said it will keep raising its rate, without giving a date. It expects prices without fresh food to rise 2.5% this financial year and 2.6% next year, while the economy grows only 0.7% a year.
On the same day the bank decided to sell its stock market funds more than two and a half times faster: about 860 billion yen a year from , up from about 330 billion yen. Its board meets next on 17 and , and then on 21 and .
The Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions.
Bank of Japan, Outlook for Economic Activity and Prices,
Sources: Bank of Japan (2, 3, 4, 5, 6), Reuters
The Pattern
We looked for cases where the Bank of Japan raised its rate and kept it the same at the next meeting. Then we checked what it did at the meeting after that, and how many meetings passed before its next rise. We found eight such meetings since 1998, when a new law on the bank came in and it began to publish each board vote. The bank has raised its rate nine times since then.
Show the other 6 cases
The Read
After a rise and one pause, the Bank of Japan usually waited again. It kept its rate at seven of eight such meetings. This time the bank itself said on that underlying inflation is now generally in line with its 2% goal. In June and September it said only that inflation was getting close. Six of those eight times a rise came later. Twice it came by the second meeting after the pause, which now falls on 21 and , and four times by the third, which now falls on 17 and . In January and a board member had already voted for a rise at the pause, and both times the rise came by the third meeting.
There are reasons for doubt. Each time it was the same bank deciding, and the meetings of March and had almost the same board. The only rise at the first meeting is the newest one, in . Three of the eight meetings were between 2000 and 2007, when the rate was 0.25% or 0.5%, far below today’s 1.25%. In one member also wanted a rise, but the bank waited twice more as oil prices jumped.
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