Bank of Japan press conference — 16 June 2026

What this says

First, regarding the guideline for money market operations, we decided by majority vote to change the target for the policy interest rate, the uncollateralized call rate overnight, from the previous approximately 0.75% to approximately 1.0%.

In addition, Member Asada opposed this, stating that regarding the impact of the Middle East situation, the downside risks to production and employment are greater than the upside risks to prices, and that it would be desirable to leave the guideline for money market operations unchanged.

Under these circumstances, considering also that medium- to long-term inflation expectations have continued to rise, there is a risk that the underlying rate of inflation will overshoot the 2% price stability target.

Regarding future monetary policy conduct, with the underlying rate of inflation approaching 2%, and taking into account that the current financial environment is accommodative, we believe that it will be necessary to continue raising the policy interest rate and adjusting the degree of monetary easing in accordance with economic, price, and financial conditions.

As a result, we decided by majority vote to maintain the current plan of reducing the planned monthly amount of long-term government bond purchases by approximately 200 billion yen per quarter in principle through the January-March quarter of 2027, and to conduct purchases of approximately 2 trillion yen per month from April 2027 onward.

Under these circumstances, considering also that medium- to long-term inflation expectations have continued to rise, we judge that there is a risk that the underlying rate of inflation will overshoot the 2% price stability target.

In this way, since the previous meeting, while the risk of the economy declining significantly has decreased and the economy is generally following the central outlook, in light of the fact that there is a risk that price increases will spread to a wide range of items and that the underlying rate of inflation will overshoot, at today's meeting we judged it appropriate to raise the policy interest rate and adjust the degree of monetary easing in line with the monetary policy conduct policy presented in the April Outlook Report.

Regarding the second question, as I said earlier, regarding future monetary policy conduct, with the underlying rate of inflation approaching 2%, and taking into account that the current financial environment is accommodative, we believe that it will be necessary to continue raising the policy interest rate and adjusting the degree of monetary easing in accordance with economic, price, and financial conditions.

That said, so far, this year's base pay increases appear likely to settle at around the mid-3% range, and looking at regular wages in the Monthly Labour Survey, for example, they are in the upper-2% to around 3% range, meaning that wages are being formed in a manner broadly consistent with 2% inflation.

As for the latter, the neutral interest rate, if the neutral interest rate could be estimated, we could say it is another 0.something percent or some percent away, but unfortunately, even looking at the latest estimates, there is considerable variation.

f the neutral interest rate could be estimated, we could say it is another 0.something percent or some percent away, but unfortunately, even looking at the latest estimates, there is considerable variation. As I think I said in a speech somewhere before, from the standpoint of practicing monetary policy, such a wide range makes it not very usable, and in practice, we have no choice but to proceed by raising short-term interest rates while examining changes in the financial environment including that,

First, regarding the timing of achieving the target — or rather, when underlying inflation will reach 2% — two members have already said that it is at 2%, so I wouldn't say there is necessarily a consensus, but I believe the majority of members place it in the period from the second half of fiscal 2026 through fiscal 2027, within a fairly wide range.

As for exchange-rate risk, regarding the exchange rate — this is always the case — the exchange rate itself is not our target, but we discuss it at every meeting as one of the important factors affecting the economy and prices. Especially at recent meetings, corporate wage- and price-setting behavior has become more active, so compared with the past, exchange-rate fluctuations are more likely to affect prices.

However, when we will reach that neutral level is, as I said earlier, something we can only judge in practice as we actually raise rates, so at this stage we do not have a view on when that will be. Therefore, it may take a long time, or it may be short, but when we reach a state where the level is neutral and the financial environment is no longer accommodative, then, unlike before, a monetary policy approach premised on that will need to emerge.

Our decision this time was to adjust the degree of easing in order to respond to the rise in prices of a broad range of items originating from high crude oil prices, as well as upside risks to underlying inflation, and it contributes to the realization of sustainable growth of Japan's economy, so I believe it is consistent with what the government is doing.

As for being behind, we have presented the basic approach of continuing to raise the policy interest rate and adjusting the degree of monetary easing in that process, so we will conduct policy appropriately so as not to fall behind the curve.

On that basis, as stated in the statement, we are simultaneously saying that we will continue raising rates, so within that series of policies, we will of course work to bring prices down to 2%, and based on the information currently available, we judged that this rate hike was appropriate.

So above all, I think the decline in downside risks to the economy is one major difference between last time and this time.

In fact, the inter-company transaction figures I mentioned earlier are one example, and even looking at everyone's news, at the consumer stage — including advance notices — news of price increases across a broad range of items is coming out, so I think upside price risks have emerged to a considerable extent.

So, to write it accurately, it is more logical to say that while still in an accommodative state, as underlying inflation approaches 2%, we adjust the degree of monetary easing by raising rates — that is what I thought, and that is why I changed it.

If the adjustment of the necessary degree of monetary easing is delayed, inflation risk may materialize and lead to a subsequent downturn in the economy.

At this point in time, we are not considering revising the current pace. Of course, at the current pace, it would take over 100 years, so I think it is possible that at some point we would review it.

From that perspective, under the approach of continuing to adjust the degree of monetary easing going forward, we intend to conduct policy appropriately so as not to fall behind the curve.

Board Member Tamura's proposal was rejected by a majority, and it is 2 trillion yen.

In order to absorb them without undue strain, it would be better to lower the pace to 2 trillion yen here, and even so, the balance sheet will shrink sufficiently, so I believe the objective will be achieved.

But conversely, these can change — for example, depending on the progress of portfolio adjustment by domestic investors, and how the market responds under that — so while naturally giving consideration to predictability, I think it is possible that we would review it if the situation changes as I just described.

In that sense, there is no specific timing now for how long to continue or when to review, but if the situation changes, it is possible that the Policy Board would change it while giving consideration to predictability.

The underlying inflation rate has been rising gradually toward 2%, and that itself has not changed. As it gradually approaches 2%, it has become necessary to be conscious of upside risk, which is only natural.

We stated that the risk of insolvency is not very large, and I do not think of it as a very large risk.

Transcript

June 17, 2026 Bank of Japan

Governor's Press Conference (Deputy Governor Uchida, Acting) — From 3:30 p.m. on Tuesday, June 16, 2026, for approximately 70 minutes

(Q) Deputy Governor Uchida, please explain the contents of today's Monetary Policy Meeting.

(A) Regarding today's decision meeting, we decided on a change in the guideline for market operations and a plan for the purchase of long-term government bonds. First, regarding the guideline for market operations, we decided by majority vote to change the target for the policy interest rate, the uncollateralized call rate overnight, from the previous approximately 0.75% to approximately 1.0%. In line with this, we also decided on changes to the applicable interest rate for the complementary deposit facility and the basic loan rate. In addition, Member Asada opposed this, stating that regarding the impact of the Middle East situation, the downside risk to production and employment is greater than the upside risk to prices, and that it would be desirable to leave the guideline for market operations unchanged. Below, I will explain the economic, price, and financial conditions behind this change in the guideline for market operations. First, regarding Japan's economy, while some weak movements are seen due in part to the impact of the Middle East situation, it is recovering moderately. That is, although rising crude oil prices are a factor pushing down the economy, high levels of corporate profits and improvements in the employment and income environment are acting in the direction of supporting the economy. Meanwhile, in addition to the effects of various policies including the government's measures to ease energy burdens being expected going forward, and with progress in alternative procurement of raw materials for which dependence on the Middle East is high, the risk that the economy will decline significantly is judged to be lower than it was at one point. Under these circumstances, Japan's economy is generally following the central outlook of continuing moderate growth while the growth rate shrinks. On the price front, although the year-on-year rate of change in consumer prices excluding fresh food is currently below 2% due to the effects of the government's measures to ease energy burdens, price pass-through in business-to-business transactions is proceeding at a somewhat fast pace starting from rising crude oil prices, and this may spread going forward to price increases for a wide range of items at the consumer stage. Under these circumstances, considering also that medium- to long-term inflation expectations have continued to rise, there is a risk that the underlying rate of inflation will overshoot the 2% price stability target. Japan's financial environment is in a relaxed state. Real interest rates are negative, mainly in the short- to medium-term zone. Demand for funds from firms and others is increasing, and favorable issuance conditions continue in the CP and corporate bond markets. Based on these economic, price, and financial conditions, at today's meeting, from the perspective of achieving the 2% price stability target in a sustainable and stable manner, we judged it appropriate to adjust the degree of monetary easing. Even after the change in the policy interest rate, the accommodative financial environment will be maintained, so we believe we will continue to firmly support economic activity.

Regarding future monetary policy conduct, with the underlying rate of inflation approaching 2%, and taking into account that the current financial environment is accommodative, we believe that, in accordance with economic, price, and financial conditions, we will continue to raise the policy interest rate and adjust the degree of monetary easing.

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In addition, regarding the timing and pace of adjustment, our policy is to examine the likelihood and risks of the central outlook for the economy and prices being realized while closely monitoring the impact of developments in the Middle East situation on Japan's economy and prices. The Bank of Japan will conduct monetary policy appropriately under the 2% price stability target from the perspective of achieving it in a sustainable and stable manner.

Next, I will explain the plan for purchases of long-term government bonds. At today's meeting, while also referring to the opinions of market participants, we examined trends and functioning in the government bond market and discussed how government bond purchases should be conducted going forward. As a result, we decided by majority vote to maintain the current plan of reducing the planned monthly amount of long-term government bond purchases by approximately 200 billion yen per quarter in principle through the January-March quarter of 2027, and to conduct purchases of approximately 2 trillion yen per month from April 2027 onward. In addition, Member Tamura submitted a proposal to reduce the planned monthly purchase amount by approximately 200 billion yen per quarter in principle through the January-March quarter of 2028, on the grounds that the formation of long-term interest rates should be left to the market and market participants, but it was rejected by majority vote. The basic thinking regarding government bond purchases remains unchanged from before. That is, long-term interest rates are basically formed in financial markets, and the Bank of Japan's government bond purchases should be conducted in a predictable manner while ensuring flexibility to give consideration to the stability of the government bond market. Of this, regarding predictability, in addition to the planned monthly purchase amounts through March 2027, we decided to present the outlook for government bond purchase amounts and the outstanding balance of government bond holdings from April 2027 onward. From the perspective of ensuring flexibility, as before, if long-term interest rates rise sharply, we will flexibly implement increases in purchase amounts, regardless of the planned monthly purchase amount. Also, going forward, we will not conduct an interim assessment of the long-term government bond purchase plan, but based on the basic thinking regarding government bond purchases and trends in the government bond market, we believe it is possible that the purchase pace may be reviewed at a Monetary Policy Meeting if necessary.

(Q) I have two questions. First, the United States and Iran have reached an agreement toward ending the fighting, and there are moves toward easing tensions surrounding the Middle East situation. At the time of the previous meeting in April, you decided to keep policy unchanged, taking into account downside risks to the economy. At today's meeting, what changes in conditions since April and what factors did you emphasize in deciding to raise interest rates? Please tell us.

Second, I would like to ask about the pace of future interest rate hikes. Six months have passed since the previous rate hike. I think much depends on economic and price conditions, but do you think you will continue raising interest rates at roughly the same pace going forward, or is it possible that you would raise rates at shorter intervals if inflation concerns intensify? Please share your thinking.

(A) First, regarding the first question, looking at conditions since the previous meeting, with regard to the Middle East situation, both the United States and Iran have announced that they agreed to a memorandum concerning the end of fighting, among other developments, and this can be said to be a desirable development. However, including the pace of recovery in logistics going forward, the situation remains uncertain.

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That said, looking at Japan's real economy, as I said earlier, although rising crude oil prices are a factor pushing down the economy, high levels of corporate profits and improvements in the employment and income environment are acting in the direction of supporting the economy. Meanwhile, in addition to the effects of the government's measures to ease energy burdens being expected going forward, and with progress in alternative procurement of raw materials for which dependence on the Middle East is high, we judge that the risk that the economy will decline significantly is lower than it was at one point. Under these circumstances, we judge that Japan's economy is generally following the central outlook of continuing moderate growth while the growth rate shrinks. On the price front, the current year-on-year rate of change in consumer prices is below 2%, but starting from the rise in crude oil prices, price pass-through in business-to-business transactions is proceeding at a somewhat fast pace, and this may spread going forward to price increases for a wide range of items at the consumer stage. Under these circumstances, considering also that medium- to long-term inflation expectations have continued to rise, we judge that there is a risk that the underlying rate of inflation will overshoot the 2% price stability target. In this way, since the previous meeting, while the risk that the economy will decline significantly has decreased and the economy is generally following the central outlook, in light of the fact that price increases may spread to a wide range of items and that there is a risk that the underlying rate of inflation will overshoot, at today's meeting we judged it appropriate, in line with the monetary policy conduct guideline presented in the April Outlook Report, to raise the policy interest rate and adjust the degree of monetary easing.

Regarding the second question, as I also said earlier, regarding future monetary policy conduct, with the underlying rate of inflation approaching 2%, and taking into account that the current financial environment is accommodative, we believe that, in accordance with economic, price, and financial conditions, we will continue to raise the policy interest rate and adjust the degree of monetary easing. Regarding the future path of interest rates and the pace of adjusting the degree of monetary easing, for the time being, we believe it is necessary to continue closely monitoring the impact of developments in the Middle East situation on financial and foreign exchange markets and on Japan's economy and prices. On that basis, we would like to make appropriate judgments while examining the likelihood and risks of the central outlook for the economy and prices being realized. In particular, regarding price developments, given that the underlying rate of inflation is approaching 2%, we believe it is important to stabilize it at around 2%.

(Q) You just mentioned that there is a risk that underlying inflation will exceed 2%, and I think in Japan it has not really been anchored at 2%. In such a situation, if you want to stabilize underlying inflation at 2% while it is not anchored at 2%, I think an early rate hike is necessary. On the other hand, there is also a view often heard in Japan that unless a wage-price spiral occurs, inflation will not gain momentum. Please address that as well.

(A) I believe your question was about how to anchor at 2% while it is not anchored at 2%, and about the wage-price spiral. First, we conduct policy with emphasis on the underlying rate of inflation, and on this point, it continues to rise moderately toward 2%. And in this main scenario, the central outlook, the main scenario is that from the second half of this fiscal year through next fiscal year, it will reach a level broadly consistent with the price target.

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However, in light of the recent speed of price pass-through in business-to-business transactions and the fact that medium- to long-term inflation expectations have been rising, continuously, it is necessary to pay attention to the risk that the underlying rate of inflation will overshoot 2%. This is also one reason for today's rate hike. As for the wage-price spiral, I think the mechanism itself, in which wages and prices rise while mutually referring to each other, has become quite established amid labor shortages. However, whether it will be exactly 2% is something that will need to be watched going forward in terms of wage conditions and price conditions. So far, this year's base pay increases look likely to settle at around the mid-3% range, and for example, looking at regular wages in the Monthly Labour Survey, they are in the upper-2% to around 3% range, meaning that wages are being formed in a manner broadly consistent with 2% inflation. In the sense that this has been the trend over the past few years, although "virtuous spiral" may not be a phrase we use much, I think the mechanism itself in which prices and wages rise while mutually referring to each other has become reasonably established, and the fact that this is consistent with 2% is a favorable development over the past few years.

(Q) In today's decision to raise interest rates, there seems to be both the aspect of judging that the economy is generally following the central outlook, and the aspect of being conscious of the risk that the underlying rate of consumer price inflation will overshoot 2%. I think there are both the side of raising rates because the probability of achieving the central scenario has increased, and the side of raising rates because risks have increased. Which did you place more weight on in that balance? Also, when thinking about future rate hikes, which will become more important? Please give your view on that. That is the first point.

The second point is related to that risk, but does the fact that there is a risk that underlying inflation will overshoot 2% going forward mean that multiple rate hikes are in view? On the other hand, how do you think about the policy interest rate approaching the neutral interest rate? There is also the view that the closer the policy rate gets to the neutral interest rate, the more carefully one should proceed with rate hikes while cautiously watching the impact on the financial environment, but if the upside risk to prices is also increasing, then a faster pace of rate hikes than the market expects is also possible. Please tell us how you think about this balance.

(A) The first point is whether this time you emphasized the so-called first pillar, the main scenario for the economy and prices, or the second pillar, risks, namely the upside risk to prices. Rather than saying anything about weights, I think the answer comes down to having decided by taking into account both of those elements based on all the information submitted to today's decision meeting. It is not originally the kind of thing where one has a higher weight, so I think the answer to this is both. I think the future process will be that this is determined by the information submitted at the time.

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As for the latter, the neutral interest rate, if the neutral interest rate could be estimated, we could say it is another 0.something percent or some percent away, but unfortunately, even looking at the latest estimates, there is considerable variation. I think I have said this in a lecture somewhere before, but from the standpoint of conducting monetary policy in practice, such a wide range makes it not very usable, and in reality, I think the only way is to examine changes in the financial environment including that while in the process of raising short-term

(Question) First, regarding the risk that if the yen depreciates further from the current stage, the impact on import prices will be greater — I think that is true — but if the yen continues to depreciate going forward, do you think there is a high risk of secondary effects, so to speak, on prices? I'd like to ask about these two points.

(Answer) First, regarding the timing of achieving the target — or rather, when underlying inflation will reach 2% — two members have already said that it is at 2%, so I would not say there is necessarily a consensus, but I believe the majority of members place it in the second half of fiscal 2026 through fiscal 2027, within a fairly wide range. At this stage we do not actually know the situation with certainty — these are all forecasts — but each forecast falls within that range. Accordingly, the pace at which we adjust the degree of easing toward the so-called neutral rate could logically change, but at this stage I think it will depend on future economic and price conditions.

As for exchange-rate risk, regarding the exchange rate — the exchange rate itself is not our target, not our objective — but we discuss it every time as one of the important factors affecting the economy and prices. Especially at recent meetings, as firms' wage- and price-setting behavior has become more active, exchange-rate fluctuations have become more likely to affect prices than in the past. Furthermore, I am aware that the possibility of this affecting expected inflation or underlying inflation has become stronger as a mechanism compared with before, so I think it comes down to continuing to conduct policy while carefully monitoring financial and foreign-exchange market developments and their impact on prices.

(Question) One point is that, as stated in the statement, there was also language this time saying that it is appropriate to adjust the degree of monetary easing, and that even after the change in the policy rate, an accommodative financial environment will be maintained. There have been questions about the neutral rate before as well, but regarding the raising of the policy rate to adjust the degree of monetary easing, until when can this kind of explanation be given? For example, if inflation approaches 2% in the second half of this year, would you recognize that this kind of language — stepping out from the accommodative zone and approaching a neutral level — will also become unusable in the near future? Please tell us.

Another point is about consistency with the government's economic policy. The Takaichi administration advocates promoting domestic investment. Is a rate hike that raises funding costs consistent with the government's economic policy? Also, the government has been injecting subsidies such as gasoline subsidies under inflation — are rate hikes to suppress high prices and policies such as gasoline subsidies consistent? Please tell us.

(Answer) First, on the former — this is mostly covered by what I said earlier — the current thinking on the conduct of monetary policy is, in a sense, premised on monetary easing continuing, a policy of adjusting the degree of monetary easing, that is, until we reach a neutral level. Logically, that is what it comes to. However, when we will reach that neutral level is, as I said earlier, something we can only judge in practice as we actually raise rates, so at this stage we do not have a view on when that will be. Therefore, it may take a long time, or it may be short, but when we reach a state where the financial environment is at a neutral level, that is, not accommodative, then unlike before, a monetary policy stance premised on that will need to emerge.

As for the relationship with government policy, the government, while the negative effects associated with the Middle East situation continue, is working to procure raw materials and thereby avoid downside risks to the economy, and is providing support to sectors where the adverse effects of high prices are large, through measures such as energy burden-easing measures. In addition, as you said, in a medium- to long-term sense, they are promoting investment that contributes to resilience and medium- to long-term growth. Our decision this time was to adjust the degree of easing in order to respond to the rise in prices of a broad range of items originating from high crude oil prices, as well as to upside risks to underlying inflation, and it contributes to the realization of sustainable growth of Japan's economy, so I believe it is consistent with what the government is doing. Also, as is already written, we judge that even after the rate hike, Japan's financial environment remains in an accommodative state, so we will continue to firmly support economic activity, and in that sense too, in terms of medium- to long-term investment, I judge that this is supportive.

(Question) I have two questions. First, I'd like to ask about the division of roles in the absence of the Governor. At this meeting, Deputy Governor Himino served as acting chair of the Policy Board, and Deputy Governor Uchida took on this Governor's press conference on an acting basis. I think this relates to the Bank of Japan Act, and I believe the chair and the first-ranked person acting for the Governor's duties each took on their respective roles, but I'd like to ask whether it is even the case that the two Deputy Governors divide the acting/proxy roles between them, and whether this is customary. Also, regarding the positioning of this press conference, are you speaking now as the chair of the meeting, or are you stating your own views and thinking as Deputy Governor? Well, it probably doesn't make much difference, and I'm not particularly particular about it, but I'd like to hear your recognition.

The second point is about unconventional monetary policy, which you are well versed in given this is a milestone. In a speech at the Financial Economics Society one year ago, you touched on interpretations and views regarding yield curve control and central bank balance sheet management, and you closed with the phrase "a sense of self-admonition." When looking back on unconventional monetary policy, I'd like to hear the true intent of using such words, including from the perspective of proceeding toward the exit from such policies.

(Answer) First, on the former: regarding the chair position, Deputy Governor Himino; and regarding acting for the Governor, I am first in line. The former is a decision of the Board, and the latter is a decision of the Governor. As for whether it is customary, for example, under the previous setup, I believe Deputy Governor Amamiya was first in line for both, so it is not the case every time, and I think it depends on the thinking of the Governor and the Policy Board at the time. As for the press conference, this is nominally the Governor's press conference and questions are asked about matters other than monetary policy decisions as well, so it is as Governor, and I am acting on his behalf. Also, naturally, I am not stating my personal views, but intend to speak mainly about what was discussed at the Policy Board.

As for the second point, this is clearly a question directed at me personally, but I did not use that phrase only about unconventional policy. Actually, afterward, for example, when thinking about how currency will be used, digitalization itself is probably important in thinking about how we should respond to money issued by central banks. And how to think about the balance sheet. Since that speech focused on relatively technical content, I used the word "self-admonition" in the sense that such points are also important, and that, understanding this, it is not a priori the case that whatever a central bank issues will be trusted by everyone — that requires our efforts.

(Question) Regarding the pace of future rate hikes — while there is indeed upside risk to prices beyond expectations, and there is also a US-Iran agreement — how are you envisioning the previously mentioned pace of once every six months in the market going forward? And I'd like to hear your view on whether you are currently behind the curve, and if you are not, I'd like you to explain frankly, in a plain and easy-to-understand way.

(Answer) On the former, it is as I answered in the very first question from the moderator: naturally, while taking into account economic, price, and financial conditions — especially for the time being the Middle East situation, and beyond that, or including that — we look at whether the economy and prices are on track, and at the degree of confidence and risks. Especially for prices, we need to judge including upside risks. As we gradually approach 2%, I think this has become one of the important factors. As for being behind, we have presented the basic thinking of continuing to raise the policy rate and adjusting the degree of monetary easing in that process, so we will conduct policy appropriately so as not to fall behind the curve.

(Question) I have two questions. The first is about the effect of rate hikes. You said earlier that even if we raise rates, an accommodative financial environment will continue to be maintained, while upward pressure on prices is already strengthening. How much effect will this 0.25% rate hike have in suppressing and stabilizing excessive price increases — do you think it will be sufficiently effective, or do you think the effect itself will not emerge unless we raise rates a bit more?

The second point is about the timing of the rate-hike decision. The upside risk to prices was already pointed out by multiple members at the previous meeting, and even led to a rate-hike proposal. Please tell us why the BOJ judged that deciding at this meeting, rather than at the previous meeting or the next meeting, was appropriate.

(Answer) I think the first and second questions are related, but naturally a 0.25% rate hike, and what follows, will itself affect the economy and prices. On that basis, as stated in the statement, we are simultaneously saying that we will continue raising rates, so within that series of policies we will naturally work to bring prices down to 2%, and based on the information currently available, we judged that this rate hike was appropriate.

On timing, I will speak on the premise that there are differences of opinion among members, but the reason we raised rates this time rather than last time is, as I said earlier, that we are simultaneously looking at downside risks to the economy. Naturally we are not looking only at prices; we are looking at both prices and the economy, and one major factor is that the downside risk to the economy coming from the Middle East has declined compared with a while ago. This is based on, for example, progress in alternative procurement, and the fact that the government's energy burden-easing measures are quite large and are expected to continue having effects going forward. Also — this was true last time as well, so it is not particularly new this time — corporate profits are at extremely high levels, and the employment and income environment is improving; these are the foundations of the economy. So above all, I think the fact that downside risks to the economy have declined is one major difference between last time and this time. In addition, the fact that inter-firm transaction prices — domestic corporate goods prices — have been rising is one factor that makes us more strongly aware of risk in relation to prices, but if one says this itself was originally anticipated, there is that aspect. So if we are talking about the difference from last time, I think the biggest is that downside risks to the economy have decreased.

(Question) I have two questions. One is that I'd like to ask a bit more about the judgment on upside risks to prices. The Middle East situation is moving toward the end of the war, and crude oil prices are falling. You said earlier that there is upside risk to prices, but including this rate hike, has the degree of upside risk to prices become smaller compared with April? If there is a change, please tell us your view on how large that change is.

The other is about the part on future monetary policy conduct in the statement. Previously there was language saying that real interest rates are at extremely low levels, but I believe this has been removed this time. Is this a manifestation of the judgment that, with successive rate hikes, we have come closer to the neutral rate, or that the degree of easing has weakened? Please tell us your view on this change.

(Answer) The degree is quite difficult, but the upside risk to prices itself, as written in the statement, I believe exists. In fact, the inter-firm transaction figures I mentioned earlier are one example, and even looking at everyone's news, at the consumer stage — including advance notices — news of price increases across a broad range of items is coming out, so I think upside risk to prices is emerging to a considerable extent. How much this will be eased by the fall in crude oil prices is a judgment to be made from now on. The [price increases] accompanying the earlier rise in crude oil have now reached the mid-stream stage, but how far they will actually pass through to the consumer stage is one point we should carefully watch. Whether the degree differs from last time is, in short, a matter of forecasts, so some members probably thought it was originally anticipated, and we did not think there was no such risk either, so the degree is quite difficult. I think it differs slightly from person to person.

As for the part where "real interest rates are extremely low" was changed to "the financial environment is in an accommodative state," given that such questions come up every time, rather than discussing that, thinking more logically: why do we adjust the degree of monetary easing? It is not that we are considering only the level of real interest rates or the policy rate; we are judging the overall state of monetary easing. So, to write it accurately, it is more logical to say that while the financial environment is still accommodative and underlying inflation is approaching 2%, we will adjust the degree of monetary easing by raising rates. That is why we changed it that way. In that sense, rather than writing something like the sense of distance as to whether it is "extremely" low in a single phrase, I think it is more appropriate to evaluate and explain the overall degree of monetary easing.

(Question) Does that mean there was no change in judgment, but rather a change in the way of explaining it

But could you tell us why Governor Ueda did not participate in the vote this time?

(Answer)

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I understand this was due to medical treatment.

(Question) Now that you have decided to raise interest rates this time, and with views on the end of the U.S.-Iran conflict and moves toward concluding an agreement, I believe that in the Governor's speech on the 3rd, he said something to the effect that if necessary responses are delayed, there is a risk of being forced into a large rate hike. Is that possibility of a large rate hike still present now? Also, when you say a large rate hike, are you envisioning something like 50bps? I would like to hear your thoughts.

(Answer) If the adjustment of the necessary degree of monetary easing is delayed, inflation risk may materialize and lead to a subsequent downturn in the economy. To avoid that, if we were forced into rapid rate hikes later, it would affect not only the economy but also financial markets and the financial system — that is the gist of what the Governor stated in his speech. This itself is always true. It is a kind of general principle. Of course, depending on the situation, such a situation may become a reality or may become a somewhat distant matter. But considering the current situation, the risk itself is in a state that cannot be ignored, which is what he said in the speech, and I believe that the intent is also reflected in today's decision.

(Question) Mr. Uchida, I believe you were in the Credit Bureau, which no longer exists, in the 1990s, and under Section Chief Shirakawa you were involved in negotiations with the Ministry of Finance and so on. So I would like to ask deliberately: if by any chance a situation that could be called a financial crisis were to arise, what is the most important thing a central bank should do? Is it easing, or quantitative easing, or issuing a statement to provide reassurance?

(Answer) There are various approaches, and in actual financial crises, we ourselves have provided funds. Also, as I said in a speech somewhere, I think the fact that liquidity was being provided itself during the first quantitative easing had an extremely important effect in maintaining the financial system. I believe I also wrote that in the [multifaceted] review. This cannot be stated categorically. In other words, when financial system instability occurs, it occurs through various routes, so including whether it occurred here or abroad, or domestically, there are cases that can be settled with something like a statement, cases where funds actually have to be provided, and cases where it can affect monetary policy — so there is not necessarily one answer. I am not sure whether this counts as an answer, but that is my view.

(Question) It has been half a year since the BOJ began selling ETFs. During this period, due in part to the rise in stock prices,

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looking at the estimated market-value basis of the BOJ's ETF holdings, they have actually increased, and the ratio of the BOJ's holdings to the market capitalization of the Tokyo Stock Exchange Prime Market has also actually risen, giving the impression that the BOJ's presence in the stock market has even strengthened. Former Governor Kuroda has also made remarks to the effect that at some point in the future it might be acceptable to accelerate the pace of ETF sales. What is your view on the current state of ETF sales over the past half year and the possibility of accelerating the pace of sales in the future?

(Answer) At this point in time, we are not considering revising the current pace. Of course, at the current pace it would take more than 100 years, so I think it is possible that at some point it will be reviewed. It does not mean that it will stay this way for 100 years, so I think that could happen at some point, but at this stage I do not think the situation has changed significantly in particular, and as you said, it has not even been a year yet, so I would like to make this a future issue.

(Question) Deputy Governor, this rate hike to 1.0% will be a level for the BOJ not seen since 1995, with 31 years having passed. In a sense, how do you think this situation — that it took 31 years to get here from abnormal monetary easing — will be evaluated when viewed historically? And in a sense, while the BOJ is now struggling to raise rates, the government has continued, since Abenomics, what could be called expansionary fiscal policy and inflation policy. This appears to run counter to the BOJ's policy as well. Regarding the government's policy here, should this kind of expansionary inflation policy not be abandoned? What are your thoughts on that?

(Answer) First, regarding the fact that exiting deflation took time, the biggest reason for this itself is that deflationary psychology was deeply entrenched, and within that, there was the major background that it was difficult to pursue monetary easing while nominal interest rates were already low. In that context, although opinions may differ among people, I myself believe that large-scale easing created employment and led to a state of labor shortage, and that this has created the current state in which both the economy and prices, as well as wages, are rising, so I think it was effective in exiting deflation. Because it was effective, we are now doing the work of gradually exiting, and of course since this is a matter that affects the economy, it comes down to responding in sequence. As for fiscal policy, that is something carried out under the responsibility and judgment of the government and the Diet, so I have no comment.

(Question) Since the April policy meeting, I think there were times when the yen temporarily strengthened due to foreign exchange intervention moves, but since then the yen has depreciated, and last month long-term interest rates also rose. I think this shows some concern in the market that the BOJ will fall behind the curve. What are your thoughts on that? Also, even after today's rate hike was actually announced, the yen did not swing much toward appreciation and seems to be gradually depreciating.

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Earlier, the Deputy Governor said that policy would be conducted so as not to fall behind the curve, but if I may put it in terms of a gap between the market's understanding and how policy is being communicated, could you please tell us again about that point?

(Answer) I do not comment on daily market movements, but of course the state of financial markets reflects market participants' views of the current situation and outlook for the economy and prices, and rates are formed accordingly, so I think it contains extremely important information. That said, our policy is conducted for the sake of price stability, and of course it is conducted with the aim of contributing to the sound development of the national economy through price stability. From that perspective, under the approach of continuing to adjust the degree of monetary easing going forward, we intend to conduct policy appropriately so as not to fall behind the curve.

(Question) I would like to ask about the decision on the government bond purchase plan. This time, it has been decided that purchases of about 2 trillion yen will be conducted from April 2027 onward, but Committee Member Tamura's proposal was rejected by a majority, and it is 2 trillion yen. Even with this 2 trillion yen, the materials show that it will decline due to redemptions and so on, but what exactly does this 2 trillion yen mean? Is it a lot or a little? Some people say it is a kind of consideration for an administration inclined to seek easing, but is that a cynical view?

(Answer) This is of course something we judged independently after hearing the opinions of market participants. That said, the reason for the reduction is, as also written in the materials, that the functioning of the government bond market has been improving quite steadily, and compared with a while ago, the need to reduce further has diminished. Meanwhile, since we are reducing our government bond holdings, someone else needs to hold them, and for that, a certain preparation period is necessary. In order to absorb them without undue strain, it is better to lower the pace to 2 trillion yen here, and even so the balance sheet will shrink sufficiently, so I think the objective will be achieved. Of course, whether 2 trillion yen is necessarily correct is a matter that will be determined in relation to the market, so it will be a matter for next fiscal year onward, and on the premise that it will be reviewed if necessary, please understand that for today we have decided to continue at 2 trillion yen for the time being.

(Question) I would like to ask about government bond purchases. Earlier, you said that it would be reviewed if necessary from next fiscal year onward. It is said that no interim assessment will be conducted in the future, and that the purchase pace may be reviewed at Monetary Policy Meetings if necessary. As specific criteria for review at that time, for example, would it be structural changes in the government bond market, or changes in the positioning of government bond purchases in monetary policy? Or is the continuation of 2 trillion yen the basic line for the time being, and is the possibility of review low? Please tell us your thoughts on this.

(Answer) We have not decided in advance how long to continue about 2 trillion yen, but the reason we set it at about 2 trillion yen this time is, first, as I just said, that market functioning is steadily improving, and on the other hand, that it will take a certain preparation period for domestic investors such as banks and individuals, instead of the BOJ, to take on the portion we are letting go of. I think these things will not change so easily. But conversely, this can change — for example, depending on the progress of portfolio adjustment by domestic investors, and how the market responds under that — so of course we must give consideration to predictability, but if necessary, if the situation changes as I just mentioned, I think it is possible that this will be reviewed. In that sense, there is not something like how long we will continue now or when we will review it, but if the situation changes, it is possible that the Policy Board will change it while giving consideration to predictability.

(Question) I believe this is the first time that a rate hike has been made on the grounds of upside risk to the underlying inflation rate exceeding 2%. Until now, you had been aiming to raise underlying inflation to 2%, and at the beginning the Deputy Governor said you would maintain a state stable at around 2%. Is it correct to understand that the phase has shifted?

(Answer) The economy and prices are always like this, but phases do not suddenly change at some point. The underlying inflation rate has been rising gradually toward 2%, and that itself has not changed. As it gradually approaches 2%, it has become necessary to be conscious of upside risk, which is only natural. So rather than saying the phase has changed, I think it is better to understand that as the stage advances, a situation has arisen in which these matters should be given greater weight.

(Question) I would like to ask about the BOJ's risk of insolvency. In the fiscal 2025 accounts, the BOJ's interest on government bonds — that is, interest received — and current account deposit interest — that is, interest paid — show a deficit of about 190 billion yen in the difference. In other words, this has become a currency issuance loss rather than a currency issuance gain. How much sense of crisis do you, Mr. Uchida, have about this situation? In other words, this appears to indicate that insolvency is approaching. What do you think about the risk at that time?

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(Answer) In the latter half of the year before last (Note), we released a review and also provided estimates, and in that we have judged to a certain extent the possibility of a deficit or, further, the possibility of insolvency. In that, we stated that the risk of insolvency is not very large, and I do not think it is a very large risk. However, it goes without saying that the financial situation is important, so I naturally think it is necessary to make judgments taking that into account as well. But this is something that was understood from the beginning: after doing something like quantitative and qualitative monetary easing, it is profitable when conducted, and a negative phase comes afterward. As long as we conduct policy, we must do so with a certain cost understood from the beginning, and I myself believe I have promoted quantitative and qualitative monetary easing with that in mind. Let me add that while the financial situation of a central bank is important, for example, situations of insolvency or deficit have already occurred at central banks in Europe and the United States, and the conduct of policy is not hindered by that — I believe this is almost a consensus in the central banking world.

(Question) I would also like to ask about government bond purchases. Today, the BOJ has presented in its statement a projection of what will happen to its government bond holdings. Is this, unless something major happens, a kind of view within the BOJ of how far it can reduce its government bond balance? That is one point.

And one more, briefly. On the other hand, there is a point that the BOJ raising rates while stopping the reduction of government bond purchases is somewhat inconsistent with normalization — that what you are doing is inconsistent. And as was mentioned earlier, some in the market see this as consideration for fiscal policy. Deputy Governor Uchida, please address that point.

(Answer) First, regarding the projection

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