The Bank of Japan decided after its September 17–18 monetary policy meeting to encourage the uncollateralized overnight call rate to remain at around 1.25%. The decision passed by a 7–2 vote. The bank’s statement says the new guideline applies from September 24, so the decision date and effective date are different. The guideline is an operating target for money-market conditions; it should not be read as one interest rate applying to every bank loan. In the same decision, the Policy Board set the rate applied to the complementary deposit facility at 1.25% and the basic loan rate at 1.5%.

Two board members dissented. The BOJ’s note says Asada preferred to leave the guideline unchanged because consumer-price inflation excluding fresh food remained below 2% and the state of the economy could not be described as strong. Sato opposed an increase at that time, saying economic and price developments did not appear to have accelerated substantially from the period before. The detail shows that the split was not just a numerical record: the dissenters gave reasons about timing and the relationship between inflation and the target. The bank published the policy decision as the outcome of the board vote.

The majority’s statement said Japan’s economy was recovering moderately, despite some weaker areas. The BOJ reported that the recent year-over-year increase in consumer prices excluding fresh food was in the upper part of the 1% range and that underlying inflation was approaching the 2% price-stability target. The pass-through of wage increases to prices and rising medium- to long-term inflation expectations were among the factors considered for underlying inflation. The board described financial conditions as accommodative and real interest rates as low, particularly over short and medium maturities. These assessments explain the board’s reasoning; the September meeting does not determine the next inflation reading or economic growth outcome.

The bank’s outlook note listed overseas economic conditions and geopolitical risks alongside global demand related to artificial intelligence, energy prices and foreign-exchange movements as factors to monitor. The BOJ also considered the risk that underlying price pressure could overshoot the 2% target. The statement says future increases in the policy rate or adjustments to the degree of accommodation would be considered in light of developments in economic activity, prices and financial conditions. It does not set an automatic timetable for the size or pace of further steps. The around-1.25% guideline is the concrete decision taken at the September 18 meeting; subsequent policy remains conditional on the bank’s assessment.

The September package also changed lending operations intended to support private-sector action on climate change. The BOJ decided to make the lending rate on those operations variable and to set an upper limit on total lending; details were included in the decision documents. This targeted funding arrangement is separate from the overnight-rate guideline. This report relays the official decision dated September 18 and the stated reasons; it does not claim how market rates or the exchange rate subsequently moved. The key timing is that the committee made the decision at its September 17–18 meeting, the new overnight-rate guideline took effect on September 24, and the vote was 7–2.