The Bank of Japan raised its policy rate to 1 percent without its Governor in the room, and the minutes released overnight record four votes and three different splits
The Governor was not there.
Ueda Kazuo missed the meeting at which the Bank of Japan raised its policy interest rate to around 1.0 percent, according to minutes released at 08:50 in Tokyo on Wednesday, which was 19:50 on Tuesday in New York. Himino Ryozo, a deputy governor, ran the meeting in his place under Article 16 of the Bank of Japan Act. Ueda submitted a written opinion through the chairman. He did not vote, and the minutes do not say what his opinion was, or why he was absent.
Eight of the nine board members were present across the two sessions, which ran for just under two hours on the afternoon of 15 June and just over three hours the following morning.
Four votes, and no two the same
The record of the votes is the part worth reading slowly, because the Board did not split the same way twice.
On the guideline itself, seven voted to move the uncollateralised overnight call rate from around 0.75 percent to around 1.0 percent. Asada Toichiro voted against, on the view that downside risks to production and employment from the Middle East outweighed upside risks to prices. The same seven to one carried the complementary deposit facility rate to 1.0 percent and the basic loan rate to 1.25 percent, with Asada dissenting for the same reason each time.
Then the coalition changed. On the plan for government bond purchases, Tamura Naoki put his own proposal to the Board first: keep cutting monthly purchases by about 200 billion yen a quarter until the first quarter of 2028, rather than stopping the reductions in early 2027. His argument was that long-term interest rates should be left to the market. He was the only vote for it. The other seven, Asada included, voted it down, then passed the chairman's plan seven to one with Tamura against.
A third split shows up in the drafting. Takata Hajime and Tamura both objected to how the statement described the outlook for prices, each on the ground that inflation had already reached the target. Neither objection changed the vote on the rate.
So one meeting produced a hawkish dissent on bonds, a dovish dissent on the rate, two objections to the price language, and an absent Governor.
What the room said about the next one
The pace discussion is more specific than the statement suggested at the time.
One member said Japan's neutral rate appeared to be at around 2 percent, and that the Bank should therefore weigh further increases with intervals of a few months in mind. Another argued for getting closer to neutral sooner precisely to avoid having to move quickly later. A third pointed out that Japan, unlike the United States and Europe, still sits below the estimated neutral range.
Against that, members spent time on who pays. One noted that most households carrying a mortgage are of working age and that around half of them have children, and argued the effect of higher rates on them has to be weighed alongside rising deposit rates and the government's free education measures.
The Board also agreed to retire a phrase. The statement had been describing real interest rates as at significantly low levels. Members replaced it with a line about accommodative financial conditions, on the reasoning that the Bank judges the degree of accommodation on a wider set of indicators than the real rate alone.
The government asked for a pause
Before the votes, the representatives from the Cabinet Office and the Ministry of Finance asked the chairman to adjourn. He agreed. The meeting broke at 11:12 and came back at 11:29.
Seventeen minutes.
The Cabinet Office representative then said it was important for the Bank to fulfil its accountability on the rate increase, and asked it to examine the macroeconomic effect of shrinking its balance sheet. The Ministry of Finance representative said the government expected the Bank to decide as appropriate and to explain the change carefully to the market. Both framed their remarks around the initiatives of the Takaichi Cabinet.
The bond schedule the Board approved runs from about 2.7 trillion yen of monthly purchases in the second quarter of 2026 down to about 2.1 trillion in the first quarter of 2027, then holds at about 2 trillion from April 2027. On the Bank's own projection that leaves it holding around 480 trillion yen of government bonds at the end of March 2027, about 17 percent below where it stood at the end of June 2024.
The minutes were approved by the Board at its meeting on 30 and 31 July, five weeks before publication.
