Two Dissenting Votes for Rate Hikes + Surprise ETF Sales!

The Bank of Japan (BOJ) released a statement on its September interest rate decision at noon today. In this decision, the BOJ announced that it would keep the benchmark interest rate unchanged at 0.5%—marking the fifth consecutive meeting where the central bank has maintained the status quo.

However, although the decision to leave rates unchanged was in line with market expectations ahead of the meeting, two surprising developments emerged during this meeting:

First, the internal vote on the interest rate decision was 7 to 2, with board members Hajime Takata and Naoki Tamura dissenting in support of a rate hike. This is the first time under Governor Kazuo Ueda’s leadership that two members have opposed maintaining the current rate.

Both Hajime Takata and Naoki Tamura argued that the BOJ should raise interest rates by 25 basis points to 0.75% this month, as inflation risks are increasingly skewed to the upside, and the central bank should gradually move the policy rate closer to neutral levels.

Charu Chanana, Chief Investment Strategist at Saxo Bank in Singapore, stated that the dissenting opinions from Naoki Tamura and Hajime Takata highlight growing hawkish pressure within the BOJ. Although most BOJ officials still prefer a steady path, the two board members’ votes against today’s decision suggest that internal discussions in Japan are leaning toward accelerating the normalization process.

In addition to the dissenting votes, the BOJ also announced plans to begin reducing its holdings of ETFs and J-REITs. The central bank will commence the disposal of these assets after completing necessary operational preparations. It currently plans to sell approximately ¥330 billion worth of ETFs annually (at book value) and divest J-REITs at a pace of about ¥5 billion per year.