The Bank of Japan's policy board agreed in September that it was appropriate to keep raising the policy rate and to adjust the degree of monetary accommodation, the support that low interest rates give the economy, the minutes show. That adds nothing new. Markets see December as the likely timing of the next hike and have treated it as the base case for weeks. What matters is what the Bank does next.

Many members said the Bank should adjust policy while examining changes in financial conditions, including short-term interest rates, and how activity and prices respond. One member said that if signs of an upward deviation in prices appeared, the Bank should respond. Another recognized that the rise in consumer prices has generally reached the price stability target, and warned that underlying inflation might deviate upward if the trend accelerated. Some members noted that services prices have continued to rise steadily.

Since that meeting the Bank has said it will keep raising rates in line with economic and price conditions, and board member Takata dissented on rates at the October meeting. On October 30 Governor Kazuo Ueda said the Bank will weigh a rise at every meeting, the next included, and that the policy rate remains below neutral. Those statements are firmer than anything in the minutes.

The September meeting lifted the overnight call rate to 1.25% from 1%, a quarter-point rise that followed a June increase. CNBC reported that the board voted 7-2, with Toichiro Asada and Ayano Sato dissenting, and that the Bank cited a risk that inflation could run above its 2% target.

Japanese long-term yields have been grinding toward multi-decade highs. The effect reaches US rate markets through the yen-funded carry trade, in which investors borrow cheaply in yen to buy higher-yielding assets elsewhere. What moves that trade is whether the Bank acts when it meets on December 17 and 18, not whether it agreed in September to keep going.

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