BoJ hikes rates by 25bps to 1.25%, as expected, with the decision made by 7-2 vote as board members Asada and Sato dissented, while BoJ says it will continue to raise rates in response to economic and price developments as well as financial conditions

Says: Japan's economy is recovering moderately and financial conditions are accommodative. Inflation expectations are heightening moderately. Underlying inflation approaching 2%. Will consider timing and pace of rate hikes while examining the likelihood of realising the baseline scenario and risks. Necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. Will scrutinise the impact of Middle East developments, AI demand and FX on the economy and prices when setting policy. Will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity. Underlying inflation likely to gradually accelerate and reach a level consistent with the 2% target from the latter half of FY2026 through FY2027. Economy and prices moving in line with baseline projection of Outlook Report. Must be vigilant to risks, particularly Middle East developments, AI demand, FX volatility and their impact on economy and prices. There is a risk underlying inflation could overshoot 2% target. Recent depreciation of the yen likely to lead to an increase in prices. Judged that it was necessary to adjust degree of monetary support from perspective of sustainably and stably achieving price target. Dissenters BoJ's Asada considered that with the rate of increase in the CPI (all items less fresh food) below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations. BoJ's Sato considered that current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time.