Bank of Japan press conference — 18 September 2026

What this says

Regarding today's decision meeting, first, with respect to the guideline for money market operations, we decided by majority vote to change the policy interest rate — the target for the uncollateralized call rate, overnight — from the previous approximately 1.0% to approximately 1.25%. In line with this, we also decided to change the applicable interest rate for the complementary deposit facility and the basic loan rate.

In addition, Member Asada, given that the rate of increase in consumer prices excluding fresh food is below 2% and that the economic situation cannot necessarily be described as strong, judged that it would be desirable to leave the guideline for money market operations unchanged, and Member Sato judged that raising interest rates at this timing was not appropriate, given that the economic and price situation is not considered to be in a state of significant acceleration compared with the past at the present point.

As for the underlying rate of inflation, given the increasingly active wage- and price-setting behavior of firms and the rise in medium- to long-term inflation expectations, there is a risk that it will overshoot upward beyond the 2% price stability target.

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

On that basis, regarding the timing and pace of adjustments, our policy is to examine while checking the probability and risks of the central projection for the economy and prices being realized, including the effects of the Middle East situation, the expansion of AI-related demand, and fluctuations in exchange rates.

On that basis, at today's decision meeting, with the economy and prices generally moving in line with the central projection and the underlying rate of inflation approaching 2%, and taking into account the need to pay attention to upside risks to prices, including the impact of the Middle East situation you pointed out, we judged it appropriate to raise the policy interest rate.

On that basis, regarding the timing and pace of future adjustments to the degree of monetary accommodation, as before, we will examine while checking the probability and risks of the central projection for the economy and prices being realized, including the effects of the Middle East situation, the expansion of AI-related demand, and fluctuations in exchange rates.

In contrast, now that the underlying rate of inflation is approaching 2%, it has become important to stabilize the underlying rate of inflation at around 2%, so that the risk of the underlying rate of inflation overshooting upward beyond the 2% price stability target does not materialize and adversely affect the economy thereafter. In that sense, I believe the policy phase has changed.

As I said earlier, the short-term policy aim or way of thinking has changed significantly, but if you ask whether we have in mind something specific such as once every three months for the future pace of rate hikes, for example, the answer is no.

As for the current recognition that it is quite close to 2%, it is difficult to say precisely, but if it can be viewed with a single indicator, it is roughly near 2%.

However, the movement of underlying prices is important, and although it is currently roughly hitting 2%, when it comes to whether this will settle in, we are also well aware that the spring wage negotiations in fiscal 2027 are one

Until now, the amount of downside risk was thick, and as a result the pace of rate hikes was somewhat gradual, but from here on, I think the approach will be to look at risks symmetrically while deciding the timing and pace of interest rate changes.

However, it is highly uncertain whether the Saudi Arabia-related situation, which is the cause, will continue for a long time, and there is a sufficient possibility that the pipeline will be reopened early or that alternative routes will be used, so I would like to watch that carefully. That said, if it is prolonged, it is as you pointed out that there is a possibility it will affect corporate goods prices once again and further affect CPI, and I would like to watch that carefully.

Also, regarding the relationship between rate hikes and the financial environment, and in that connection, your question about whether rate hikes exceeding 25bps are possible or not, to put it in one phrase, I think there are various possibilities depending on the inflation situation, so I do not think we can decide in advance to rule out a particular approach.

among the upside risks to prices that we had listed, the Middle East situation, as has also come up in questions since earlier, has somewhat worsened, or rather has moved somewhat in the direction of pushing inflation upward.

Also, wage data as represented by the Monthly Labour Survey have, reflecting the results of the spring wage negotiations, continued to be quite solid for several months, and I was thinking that we are coming to confirm that the kind of situation shown in the spring wage negotiations is spreading throughout the economy.

The point at which the phase changed is not so much that the policy rate became 1.25%, but that underlying inflation, which had been below 2%, is gradually approaching 2%, and in the sense that we must respond symmetrically to the upside and downside risks as discussed earlier, that is the phase change.

with the rate at 1.25%, under ordinary thinking going forward, on the one hand we must carefully proceed with raising interest rates toward the neutral rate, while on the other hand, since underlying inflation is roughly 2%, and at the same time, as I have said, there are upside risks, we must proceed while also considering how to respond to them. Furthermore, having to proceed while not knowing where the neutral rate is, I think that is quite difficult.

Let me state this upfront. As for whether or not there will be consecutive rate hikes, as I have been saying, this depends on our outlook for the economy and our assessment of risks in deciding policy, and it is not something we can promise in advance, whether it will or won't happen.

Since then, for the June, July, and August data — and today the national consumer price index data was also released — looking at this, for the items that were anticipated, I'll omit the details, but I recognize that a certain degree of pass-through is progressing. In that sense, while there are some fluctuations in magnitude, I see that consumer prices are moving in the direction we had anticipated.

for a long time our goal has been to raise trend inflation, and of course in the long term to maintain it sustainably and stably at 2%, but since we had not reached that point, we have been conducting policy with the aim of raising it. As I mentioned earlier, it has come to approach roughly 2%, so the aim of future policy will be to anchor it there.

In the meantime, for the time being, we have been pointing out the risk that trend inflation will deviate upward from there, and while considering how much of a development that will show, given that the financial environment is accommodative, the next step should basically be a rate hike, and I want to judge its pace and magnitude.

It is accommodative, and I think the degree of accommodation is gradually diminishing, but whether it is in an excessive state is extremely difficult to judge.

Therefore, while it is a concept with considerable usefulness, we will carefully and thoroughly analyze it, and we will pay attention to financial conditions, including the effects of the cumulative impact of past rate hikes.

I'd like to ask in connection with the fact that two Board members opposed this rate hike.

As I briefly mentioned at the beginning, this review of the climate change response operations was decided from the standpoint of ensuring smooth conduct of monetary operations on the one hand, and stably supporting climate change response on the other, by making the loan interest rate a floating rate linked to the policy rate.

Probably the biggest point is that there is an aspect of reacting to relatively common factors. That is, inflationary pressure coming from the Middle East situation, and the strength of AI-related spending — this may affect the supply side of the economy in the long term, but so far it has been affecting the demand side.

Transcript

September 24, 2026 Bank of Japan

Governor's Press Conference — From 3:30 p.m. on Friday, September 18, 2026, for approximately 75 minutes

(Q) Please explain the contents of today's Monetary Policy Meeting.

(A) Regarding today's decision meeting, first, with respect to the guideline for money market operations, we decided by majority vote to change the policy interest rate — the target for the uncollateralized call rate, overnight — from the previous approximately 1.0% to approximately 1.25%. In line with this, we also decided to change the applicable interest rate for the complementary deposit facility and the basic loan rate. In addition, Member Asada, given that the rate of increase in consumer prices excluding fresh food is below 2% and that the economic situation cannot necessarily be described as strong, judged that it would be desirable to leave the guideline for money market operations unchanged, and Member Sato judged that raising interest rates at this timing was not appropriate, given that the economic and price situation is not considered to be in a state of significant acceleration compared with the past at the present point. In addition, at today's meeting, regarding the climate change response operations, from the perspective of ensuring the smooth conduct of monetary operations while stably supporting private-sector efforts to address climate change, we decided unanimously to make the loan interest rate a floating rate, among other things. Next, I will explain the economic, price, and financial conditions behind this change in the guideline for money market operations. As for Japan's economy, while some weak movements are seen partly due to the impact of the Middle East situation, it is recovering moderately. Looking ahead, although the impact of the Middle East situation will be a downward pressure factor, in addition to the increase in global AI-related demand, various government measures are expected to underpin the economy, so we expect it to continue moderate growth. On the price front, in addition to high crude oil prices and the yen's depreciation, due to the impact of expanding AI-related demand, domestic corporate goods prices continue to show high growth year on year. As for consumer prices excluding fresh food on a year-on-year basis, in addition to upward price pressure in business-to-business transactions beginning to spill over to the consumer stage, the pass-through of wage increases to selling prices continues, and the positive margin has been expanding moderately recently. Under these circumstances, medium- to long-term inflation expectations continue to rise, and the underlying rate of increase in consumer prices is approaching 2%. As described above, Japan's economy and prices are generally moving in line with the central projection presented in the Outlook Report. There are various risk factors for the central projection, but continued attention is necessary regarding the effects of the Middle East situation, the expansion of AI-related demand, and fluctuations in exchange rates on Japan's economy and prices. As for the underlying rate of inflation, given the increasingly active wage- and price-setting behavior of firms and the rise in medium- to long-term inflation expectations, there is a risk that it will overshoot upward beyond the 2% price stability target. Meanwhile, Japan's financial environment is in an accommodative state. Real interest rates remain at low levels, mainly in the short- to medium-term zone. Corporate and other funding demand is increasing, and financial institutions' lending attitudes continue to be proactive. A favorable issuance environment also continues in the CP and corporate bond markets. Based on the above economic and price developments, risk factors, and financial environment, 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 accommodation.

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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. As for future monetary policy conduct, with the underlying rate of inflation approaching 2% and given that the current financial environment is accommodative, we believe that we will continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with economic, price, and financial conditions. On that basis, regarding the timing and pace of adjustments, our policy is to examine while checking the probability and risks of the central projection for the economy and prices being realized, including the effects of the Middle East situation, the expansion of AI-related demand, and fluctuations in exchange rates. In particular, we believe it is important to stabilize the underlying rate of inflation at around 2%, from the perspective of ensuring that the risk of the underlying rate of inflation overshooting upward beyond the 2% price stability target does not materialize and adversely affect the economy thereafter. The Bank of Japan, under the 2% price stability target, will conduct monetary policy appropriately from the perspective of achieving it in a sustainable and stable manner.

(Q) I have two questions. The first is that the uncertain situation in the Middle East involving the United States and Iran continues. In the Outlook Report published in July, although the Middle East situation was cited as one of the risk factors for the economy and prices, it was assessed that major downside risks to the economy and major upside risks to prices were declining. Compared with July, please tell us whether there has been any change in the impact of the current Middle East situation on the economy and prices, and how it was reflected in the policy decision.

The second question is that since the negative interest rate was lifted in March 2024, the market has priced in interest rate hikes at a pace of once every half year. This time, after raising rates in June, we are raising rates again in three months. Was it judged that inflation would accelerate unless rates were raised earlier, and please tell us the reason the pace of rate hikes accelerated and the pace going forward.

(A) First, regarding your question about the Middle East situation, in the July Outlook Report, as risk factors for the central projection, in addition to the Middle East situation you pointed out, we cited the effects of the expansion of AI-related demand and fluctuations in exchange rates, and in today's statement as well, we point out that continued attention is necessary regarding the effects of such risk factors on Japan's economy and prices. Of these, regarding the Middle East situation, an uncertain situation continues. However, despite the downward pressure associated with such a situation, Japan's economy is seen as recovering moderately, with increased AI-related demand and various government measures acting in the direction of underpinning the economy. On the other hand, on the price front, crude oil prices have risen again recently. It is highly likely that upward price pressure originating from high crude oil prices and the like will continue to spill over into price increases for a wide range of items going forward. In addition, the expansion of AI-related demand and the progress of the yen's depreciation to date may lead to price increases for various items at the consumer stage going forward through price pass-through in business-to-business transactions. On that basis, at today's decision meeting, with the economy and prices generally moving in line with the central projection and the underlying rate of inflation approaching 2%, and taking into account the need to pay attention to upside risks to prices, including the impact of the Middle East situation you pointed out, we judged it appropriate to raise the policy interest rate.

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Next, regarding your following question, we have consistently indicated our policy of examining the timing and pace of adjusting the degree of monetary accommodation while checking the probability and risks of the central projection for the economy and prices being realized. Looking at economic and price developments since the previous decision meeting, the economy, partly due to the impact of the Middle East situation, shows some weak movements but is recovering moderately. On the price front, domestic corporate goods prices continue to show high growth year on year, and the year-on-year rate for consumer prices has also been expanding moderately recently. Under these circumstances, medium- to long-term inflation expectations continue to rise, and the underlying rate of inflation is approaching 2%. In this way, Japan's economy and prices are generally moving in line with the central projection presented in the Outlook Report. In addition, as I said earlier, given that the financial environment is in an accommodative state and that attention needs to be paid to various upside risks to prices, at today's decision meeting we judged it appropriate to raise the policy interest rate. On that basis, regarding the timing and pace of future adjustments to the degree of monetary accommodation, as before, we will examine while checking the probability and risks of the central projection for the economy and prices being realized, including the effects of the Middle East situation, the expansion of AI-related demand, and fluctuations in exchange rates. Until now, with the underlying rate of inflation believed to be below 2%, raising it was, in a sense, the short-term policy aim. In contrast, now that the underlying rate of inflation is approaching 2%, it has become important to stabilize the underlying rate of inflation at around 2%, so that the risk of the underlying rate of inflation overshooting upward beyond the 2% price stability target does not materialize and adversely affect the economy thereafter. In that sense, I believe the policy phase has changed. Based on this basic thinking, we will continue to carefully analyze economic, price, and financial conditions and conduct monetary policy appropriately from the perspective of achieving the 2% price stability target in a sustainable and stable manner.

(Q) You just said that the policy phase has changed, and in that sense the pace of rate hikes was slightly accelerated this time, but if the economy and prices proceed in line with the Bank of Japan's outlook and the underlying rate approaches 2%, while the accommodative environment is maintained and there are upside risks to prices, then in such a situation, can we understand that it is possible that the pace of rate hikes will continue to be faster than before, such as every three months — though the number of months is not concrete —?

The second point is that amid speculation that the pace of rate hikes might be slightly accelerated this time, in fact the terminal rate in the market seemed to be rising along with it. Regarding the relationship between the pace and the terminal rate, Governor, does a faster pace also mean a higher terminal rate, or are they considered separately? Please give us your thinking on this point, for the above two points.

(A) As I said earlier, the short-term policy aim or way of thinking has changed significantly, but if you ask whether we have in mind something specific such as once every three months for the future pace of rate hikes, for example, the answer is no. From the perspective of establishing the underlying inflation rate at 2% going forward, we will examine the outlook for the economy and prices, consider the risks, and appropriately analyze carefully at each

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decision meeting and decide policy.

Second, regarding your question about the terminal rate, although interest rates close to some terminal rates are visible in the market, I would like to refrain from commenting on such short-term market movements, but as a way of thinking, the terminal rate is probably determined by the medium- to long-term nominal neutral interest rate, judgments about how much it is appropriate to deviate from that by considering the economy and prices over a shorter horizon, and the influence of overseas interest rates and the like. In particular, regarding the neutral interest rate, there may be a question later, but as I have said before, it is a concept and variable that is quite difficult to identify, and therefore it is also difficult to identify what the terminal rate should be. In our view, while conducting policy to establish the underlying inflation rate at 2% as I said earlier, we must constantly carefully examine various data, and as we make policy changes as necessary, the terminal rate will also be determined ex post.

(Q) Governor, at this month's press conference after the G20, you expressed the view that the underlying inflation rate is quite close to 2%. The Bank of Japan has said that from the second half of fiscal 2026 through fiscal 2027, the underlying inflation rate will reach a level broadly consistent with the 2% target, but in terms of distance, do you see it being achieved at an early stage, including next month, or is it likely to take until fiscal 2027? Please tell us your current sense.

One more question, please. In judging the pace and timing of future rate hikes, what kind of data do you, Governor, intend to emphasize in making decisions? In last year's December rate hike phase, for example, you placed importance on the momentum of the initial stage of the spring wage negotiations, but do you think next year's spring wage negotiations will also be a considerably important factor in judging future rate hikes?

(A) As for the overall picture of underlying inflation developments, I expressed earlier that it is approaching, and at the G20 that it is quite close, but basically I think it is moving in line with the outlook from before, that is, the outlook that it will reach 2% from the second half of fiscal 2026 through fiscal 2027. As for the current recognition that it is quite close to 2%, it is difficult to say precisely, but if it can be viewed with a single indicator, it is roughly near 2%. However, what we want to see is whether it will settle at 2% for a considerable period, and I use that expression in the sense that it will take some time to confirm that, including such aspects.

And for the latter half, I believe your question was about what indicators we will look at in future policy conduct, and among them, whether next year's spring wage negotiations are important. As I said in the explanation of today's decision, or rather in the first question, particularly important points are the Middle East situation, AI-related matters, and fluctuations in exchange rates, which could become — and are becoming — upside risks to prices, and we will examine these in detail, but our stance remains unchanged in checking the movements of variables that determine the probability and risks of the central projection for the economy and prices, including those. However, the movement of underlying prices is important, and although it is currently roughly hitting 2%, when it comes to whether this will settle in, we are also well aware that the spring wage negotiations in fiscal 2027 are one

but there is currently no way to predict what kind of committee members will take office, so we basically do not think that worrying about that would influence the path of monetary policy or the pace of decisions to that extent.

(Q) This is somewhat related to the previous question, but from a macro perspective, while we cannot really see monetary tightening or an economic slowdown, we do not know what kind of impact this rate hike to 1.25% will have, but if the economy slows in the future, the output gap will worsen and that will work as downward pressure on prices. On the other hand, with underlying inflation, trend inflation, and the composite expected inflation rate approaching 2%, I think interest rate hikes are still necessary, but from the perspective of risk management that Governor Ueda has long mentioned, I would like to ask how you currently view the magnitude and timing of the effects of future interest rate hikes. Thank you.

(A) Broadly speaking, risks include both upside risks and downside risks. From the perspective of risk-management-based policy conduct, this is the point I answered as the third one earlier, but until now, we happened not to be looking at such risks, yet as a result upside risks materialized, and even if underlying prices ended up rising, since they were rising at a stage below 2%, it was considered OK. From now on, that would be a problem. However, of course, it would also be a problem if risks materialize to the downside, the economy worsens unexpectedly, and that affects underlying inflation and pushes it down, so in that sense we conduct risk management symmetrically. Until now, the amount of downside risk was thick, and as a result the pace of rate hikes was somewhat gradual, but from here on, I think the approach will be to look at risks symmetrically while deciding the timing and pace of interest rate changes.

(Q) I would like to ask about the independence of Japan's central bank. This is just before the July meeting, but I asked Finance Minister Katayama about the relationship between fiscal policy and monetary policy, and I asked whether the responsible proactive fiscal policy promoted by the Takaichi administration and the BOJ's gradual rate hikes are contradictory. He touched on the process of enacting the current Bank of Japan Act, and in particular said that Articles 3, which respects the BOJ's autonomy, and Article 4, which states that monetary policy is part of economic policy, were framed as they are now based on Japan's bitter past experiences, reflections, and lessons. He also said that former Prime Minister Abe, who was known at the time as a policy new breed, was involved in enacting the law, and that Prime Minister Takaichi, who was very close to Abe, and the current Takaichi administration, are inheriting that way of thinking through the accord. This is a question of where to draw the line, but at least since around June or July, the BOJ's communications and policy decisions including this rate hike may already be consistent with that policy philosophy and way of thinking, so this may be a confirmation, but with the Governor's term having only about one and a half years left, and with the normalization of monetary policy reaching a very important phase, I would like to ask again about the Governor's recognition of central bank independence.

(A) I believe this is a question about how to think about independence, especially in relation to the content of Article 4 of the Bank of Japan Act, but as stated there, maintaining close communication with the government is extremely important in other countries as well, regardless of whether it is written in law. It is impossible to conduct monetary policy without knowing, for example, what direction fiscal policy is heading in, so I believe the purpose of Article 3 is that we should determine appropriate monetary policy after confirming such matters under close communication, and we have operated in line with that and intend to continue doing so in the future.

(Q) I have two questions. The first is that, as tensions in the Middle East intensify and crude oil prices are rising again, the statement this time also mentioned the movement of increases in inter-company transaction prices spilling over into consumer prices. How will the recent rise in crude oil prices affect the timing when the core CPI reaches its peak going forward? Also, how do you view the possibility that the state in which core inflation clearly exceeds 2% will last longer than was seen at the time of the July Outlook Report, and how do you currently view the outlook as discussions proceed toward the October Outlook Report? That is my first point.

And the second point is what you said earlier, that we must avoid a major adjustment in asset prices caused by raising interest rates too rapidly. In the market, some now see, for example, a 50bps rate hike or consecutive rate hikes, but if the idea is to avoid a major adjustment in the financial environment, is such a 50bps rate hike or consecutive rate hikes hard to imagine, or are they possible depending on the inflation situation? Please tell us your thinking on that.

(A) Regarding the impact of the Middle East situation on CPI, as you said, if the rise in crude oil-related prices in March and April is the first wave, that first wave affected corporate goods prices, and while that is somewhat subsiding, on the other hand it is gradually being passed through to CPI. And now, in that situation, the second wave of the recent rise in crude oil-related fuel and other prices is occurring, so as you pointed out, what lies ahead is a concern. However, it is highly uncertain whether the Saudi Arabia-related situation, which is the cause, will continue for a long time, and there is a sufficient possibility that the pipeline will be reopened early or that alternative routes will be used, so I would like to watch that carefully. That said, if it is prolonged, it is as you pointed out that there is a possibility it will affect corporate goods prices once again and further affect CPI, and I would like to watch that carefully.

Also, regarding the relationship between rate hikes and the financial environment, and in that connection, your question about whether rate hikes exceeding 25bps are possible or not, to put it in one phrase, I think there are various possibilities depending on the inflation situation, so I do not think we can decide in advance to rule out a particular approach.

(Q) The other day, Policy Board member Takata said in a speech that overseas central banks turning to rate hikes was one factor in the change in the situation. In fact, the ECB and the FRB decided to raise rates at their most recent meetings. How does Governor Ueda think the movement of overseas central banks turning to rate hikes will affect the timing and pace of the BOJ's rate hikes? Also, in the sense that it has become a situation in which interest rate differentials are hard to narrow, I think that in terms of exchange rates, which is listed as one of the three risks, there is also a situation in which it is hard to correct the yen's depreciation, so please tell us your thinking on that as well.

The second point is that, in the main opinions from the previous July meeting, one member said that the risk of waiting cannot be said to be small. This appears to quote Governor Ueda's past phrasing, but how does Governor Ueda himself recognize the risk of waiting in the current environment?

(A) Waiting means waiting for what?

(Q) Sorry. Since I am quoting the statement exactly as it is, I recognize waiting as meaning keeping the current interest rate unchanged.

(A) First, regarding your question about the impact of overseas central bank rate hikes, since I have not spoken with the ECB or Fed governors after their rate hikes, I would like to ask them in the future where the real reason for the rate hikes was, but for example, it could have been inflation concerns arising from the Middle East situation, or on the other hand the possibility of the strength of AI demand affecting inflation, and we too incorporate such things as risks or as one element when forming our baseline outlook, and we also assess them as risk factors. That said, when overseas central banks move, that affects Japanese prices through various routes including the exchange rate channel, so I would like to watch that carefully.

I believe your question is whether, in a phase where we should consider whether to raise rates, the cost or risk of waiting, in the sense of continuing analysis without raising rates, is large or small. That depends on the inflation situation, specifically on the one hand how much risk there is that inflation, especially underlying inflation, will deviate upward from the 2% target, and on the other hand, waiting does not simply mean sitting and waiting, but rather analyzing data and information, which is always important, and it depends on how much detailed analysis is needed, especially whether this is a delicate phase requiring it. Both determine the cost and benefit of waiting. As for our current stance, I think this is a phase in which we must analyze various things carefully, but that does not necessarily mean it is fine to do so slowly. I think this is a phase in which careful analysis is required, and responding at the appropriate timing, or changing policy, is required.

(Q) Looking at the statement, in terms of the current assessment, I think it has not changed from July, and with the July rate hike, there was certainly a part that would have made it a consecutive rate hike, but if there are clear reasons or judgment factors for why the rate hike came this time rather than in July, please tell us the Governor's view.

And one more point: with the policy rate at 1.25%, I think the financial environment is still accommodative, or maintained as such, but on the premise that it is difficult to grasp the neutral interest rate, if it next became 1.5%, would the Governor still consider the financial environment accommodative?

(A) The first half, I believe, is a question about what changed from July, and as I said a little at the beginning, among the upside risks to prices that we had listed, the Middle East situation, as has also come up in questions since earlier, has somewhat worsened, or rather has moved somewhat in the direction of pushing inflation upward. Also, regarding AI, in recent months, from my sense of talking with overseas practitioners or policymakers, I feel that we are getting information that the strong performance is continuing more than expected. It is not necessarily that it is accelerating more and more, but I think the strong performance is continuing. Furthermore, in relation to underlying inflation, and this is more a second-quarter matter, some medium- to long-term inflation expectation indicators rose. And after that, they have maintained that level. Also, wage data as represented by the Monthly Labour Survey have, reflecting the results of the spring wage negotiations, continued to be quite solid for several months, and I was thinking that we are coming to confirm that the kind of situation shown in the spring wage negotiations is spreading throughout the economy. This is not to say that underlying inflation is strong or rising more and more, but I thought it was a very important point that it is gradually converging around 2%.

And regarding the second point, the financial environment, if the interest rate were to rise to 1.5% next time, whether we would still judge it to be accommodative, that is a stock phrase and I apologize, but if the time comes when it is hypothetically raised to 1.5%, we will look at the movements in economic and financial variables up to then, judge carefully, and give a fresh assessment at that time.

(Q)

I would like to ask about the relationship with the administration. Since the Takaichi administration began, when the BOJ raised rates, in December 2025 and this past June, Governor Ueda and Prime Minister Takaichi met directly about one month before each time, but this time there was no such meeting, and the rate hike was reached. Does this mean there has been a change in the way communication is conducted, or has there been a change in thinking on the side of the administration, which is said to be cautious about rate hikes?

(A) We continue close communication with the Takaichi administration at various levels.

(Q) With this rate hike, the policy rate has become 1.25%, moving again into a high level not seen in 31 years. Japan's economy is once again entering more deeply into a zone it has not experienced for a long time, and the Governor also said earlier that the policy phase has changed. Under these circumstances, what does the Governor think about the difficulty of continuing rate hikes while probing for an appropriate interest rate level in order to achieve price stability, and ideally, how should a central bank face such a phase change, with what kind of thinking and stance?

(A) The point at which the phase changed is not so much that the policy rate became 1.25%, but that underlying inflation, which had been below 2%, is gradually approaching 2%, and in the sense that we must respond symmetrically to the upside and downside risks as discussed earlier, that is the phase change. As for the difficulty from here, with the rate at 1.25%, under ordinary thinking going forward, on the one hand we must carefully proceed with raising interest rates toward the neutral rate, while on the other hand, since underlying inflation is roughly 2%, and at the same time, as I have said, there are upside risks, we must proceed while also considering how to respond to them. Furthermore, having to proceed while not knowing where the neutral rate is, I think that is quite difficult.

(Q) Governor, in today's exchange, you said on the one hand that it is also important to avoid tightening rapidly and causing harm to the economy, while on the other hand you said that with regard to consecutive rate hikes and a 50bps rate hike, you do not rule out a particular approach. I would like to confirm the meaning of this: does it mean that even if we take the option of consecutive rate hikes or 50bps, it is possible not to cause harm to the economy, or does it mean that even if it causes some harm to the economy, we could take consecutive rate hikes or a 50bps rate hike? Also, Governor, I think you have a

Let me state this upfront. As for whether or not there will be consecutive rate hikes, as I have been saying, this depends on our outlook for the economy and our assessment of risks in deciding policy, and it is not something we can promise in advance, whether it will or won't happen.

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(Q) I'd like to ask from the perspective of what changed between June, July, and this time, particularly regarding prices. At the stage of the June rate hike, it was written that there was a possibility that price pass-through in inter-enterprise transactions would proceed at a rapid pace and spread to price increases across a wide range of items at the consumer stage. Looking at that part this time, it says that it has begun to spread to the consumer stage, and the expression has changed to something considerably more assertive, or rather, indicating that the stage has advanced. I was reading this text wondering specifically which data changed at what point, but what is the basis for this change in expression?

(A) Regarding the pass-through from corporate goods prices to consumer prices, we had been looking at various information and past patterns to judge that it would spread. Since then, for the June, July, and August data — and today the national consumer price index data was also released — looking at this, for the items that were anticipated, I'll omit the details, but I recognize that a certain degree of pass-through is progressing. In that sense, while there are some fluctuations in magnitude, I see that consumer prices are moving in the direction we had anticipated.

(Q) Governor, at the G20 Finance Ministers and Central Bank Governors meeting, when it was held in the United States recently, Treasury Secretary Bessent said at a press conference after the meeting, regarding what he told the Japanese side: "I've talked to the Japanese, I've said they had a tremendous success in Abenomics and now they should actually let that run and stop the reflation." He said he told them they should stop reflationary policy. Governor, I understand you won't talk about that exchange, so that's fine, but given that there is an international view that reflationary policy should be stopped, when I asked you about Abenomics in December, you said it was at the final stage of completion. Now, as Governor, when you think proactively about the reflationary policies since Abenomics, how do you think Japan should handle fiscal policy and monetary policy? Since you also mentioned earlier that monetary policy cannot be conducted without understanding fiscal policy, I'd like to ask about both aspects.

(A) As a central bank, I will refrain from directly commenting on fiscal policy. However, if I were to answer your question regarding monetary policy, our policy — I believe there was a similar question at the G20 as well — as I said earlier, for a long time our goal has been to raise trend inflation, and of course in the long term to maintain it sustainably and stably at 2%, but since we had not reached that point, we have been conducting policy with the aim of raising it. As I mentioned earlier, it has come to approach roughly 2%, so the aim of future policy will be to anchor it there.

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(Q) In the past, when the BOJ raised rates, same-day implementation was the principle, but in this rate hike phase, due to institutional reasons and other factors, you have been consistently implementing on the next business day. In this case, not only is there a weekend but also a consecutive holiday, so the implementation is on the 24th, taking 6 days — I don't recall a rate hike with such a long interval. Given that during the weekend overseas markets are also closed, but during Japan's consecutive holidays overseas markets are open, is there any concern that some kind of problem might arise, or is there no concern whatsoever? Could you explain your assessment on this point?

(A) If a problem were to occur, it would be because something unexpected happens. But as you say, having a considerably long period between the rate change and when it affects transactions could in some cases pose a risk, so I would like to consider whether such points need to be taken into account in future MPM scheduling.

(Q) I understand you cannot discuss the contents of your meeting with Secretary Bessent, but Secretary Bessent has been quite openly and explicitly expressing concern about Japan's rising long-term interest rates and the weak yen in press conferences and media interviews. Is this concern correct, or is it excessive worry? Or is the state of long-term rates at 3% and super-long-term rates at 4% merely the first step of normalization toward a world with interest rates, or are rates rising because of some problem? Please share your view, Governor.

(A) I don't know what Secretary Bessent is thinking about the United States and what kind of concern he has about the possibility that U.S. long-term interest rate movements or Japan's long-term interest rate movements might affect the United States. Speaking in general terms, I believe the level of long-term interest rates should basically be evaluated relative to inflation trends and how strong the economy is. For now, I'll limit my comment to that.

(Q) Regarding Secretary Bessent's remarks, his comments this time were taken by the market as calling for the BOJ to raise rates, and as a result, before the September meeting, the September rate hike was already substantially priced in. If you felt any difficulties in communicating with the market in this way, please share them.

(A) Various people say various things, and that they affect the market is something we can only accept as a given. We want to proceed while always thinking about why the market reacted to various remarks, and whether that might have some medium-term impact on positions and cause some unexpectedly large impact when we next take some action — thinking about whether such a possibility exists.

(Q) Governor, I believe you used the phrase "phase change" earlier. In past press conferences, I don't recall you using such a strong phrase as "phase change," so please tell us again what kind of impact this phase change has on the pace of rate hikes. Also, as a similar phrase, in the recent speech by Board Member Takata, he also spoke of a "new phase" and said that agile rate hikes would be necessary. There may be some differences in perception between you and Mr. Takata, but please tell us whether you also share the recognition that agile rate hikes are necessary, as Mr. Takata stated.

(A) Regarding "phase change," I believe Board Member Takata is probably using it based on the idea that in the United States, after being in a rate-cutting phase for some time, due to the strength of the economy, it may shift to a rate-hiking phase. What I meant by "phase change" earlier is a phase change in the sense that Japan's trend inflation has moved from a zone below 2% to approaching roughly 2%, and the aim of monetary policy becomes to anchor it there. This is now at the starting point, and I would like to confirm quantitatively how things stand in next month's Outlook Report. While it will take some time to see whether it becomes anchored, it is of course not the case that we cannot make the next policy decision without watching it all the way. In the meantime, for the time being, we have been pointing out the risk that trend inflation will deviate upward from there, and while considering how much of a development that will show, given that the financial environment is accommodative, the next step should basically be a rate hike, and I want to judge its pace and magnitude.

(Q) At the press conference after the July decision meeting, Governor Ueda said that if, while watching price developments, the financial environment is deemed to be excessively accommodative, accelerating the pace of rate hikes is fully conceivable. After today's rate hike, does the Governor himself still consider the financial environment to be excessively accommodative? Thank you.

(A) It is accommodative, and I think the degree of accommodation is gradually diminishing, but whether it is in an excessive state is extremely difficult to judge. Fundamentally, the policy rate is on one side, and prices or trend inflation are on the other. We move the policy rate to control the latter, but since it takes time to have an effect, one of the things that emerges as we want to look at various things in the meantime is the financial environment. However, there is also a lag in how the financial environment moves when the policy rate moves. For example, a considerable portion of lending is fixed-rate lending, so even if the policy rate or market rates move, it takes time for those rates to move, making judgment quite difficult. Therefore, while it is a concept with considerable usefulness, we will carefully and thoroughly analyze it, and we will pay attention to financial conditions, including the effects of the cumulative impact of past rate hikes.

(Q) I'd like to ask in connection with the fact that two Board members opposed this rate hike. In proceeding with further rate hikes, particularly over the judgment of whether the financial environment is neutral, I think situations where Board members' opinions are divided may be anticipated going forward. How should we understand the fact that Board members' opinions are divided in the first place, and furthermore, as Chair, what do you think is important for building consensus?

(A) The fact that opinions are divided is natural — if opinions were never divided, there would be no need for discussion. Opinions being divided, discussing to narrow the differences as much as possible, and then voting to decide where differences remain — I think this normal way of conducting such meetings is sound, and we follow it. Therefore, I do not think that the fact that there were opposing votes is something extremely troubling.

(Q) I'd like to ask about the climate change response operations. This time, you changed them to a floating-rate structure and a 50 trillion yen cap. Depending on the bank, it may have served as a substitute for the loan increase operations for which refinancing had already ended. Could you tell us about the awareness of the issues that led to this change, the reason for setting the cap at 50 trillion yen, and the possibility of further changes?

(A) As I briefly mentioned at the beginning, this review of the climate change response operations was decided from the standpoint of ensuring smooth conduct of monetary operations on the one hand, and stably supporting climate change response on the other, by making the loan interest rate a floating rate linked to the policy rate. At that time, we set a lending limit and a cap on total lending, and given how this facility has been used so far, we consider it a reasonable cap when extrapolating and extending that. So this is not intended to put a major brake on the climate change response operations or the climate change response lending that underlies them, and I believe it is not structured that way.

(Q) This month, the Fed, ECB, and BOJ all raised rates — I believe this is the first time they have raised rates in the same month. Of course, I think each is doing what is appropriate considering its own country's economy and prices, but how do you view this phenomenon, Governor?

(A) Probably the biggest point is that there is an aspect of reacting to relatively common factors. That is, inflationary pressure coming from the Middle East situation, and the strength of AI-related spending — this may affect the supply side of the economy in the long term, but so far it has been affecting the demand side. It is a slight inflationary pressure, and it is giving strong momentum to the

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