If asked, 'Has the government started opposing interest rate hikes?'—The one point that has changed in the 'Summary of Opinions' since the end of negative interest rates
Former Bank of Japan official, PhD in Mathematics from the University of Tokyo, and former Chief Interest Rate Strategist at Nomura. I achieved the first-ever 3rd place ranking in two categories (bonds and securitization) in the Nikkei Veritas analyst rankings. Based on my experience of making 400 proposals a year to institutional investors, I will break down the ‘essence of finance’ in a way that bankers and securities professionals can use directly in client talks and internal presentations. All past articles are available exclusively to members (free articles move to member-only status two days after publication).
On October 1, the Bank of Japan released the ‘Summary of Opinions’ from its Monetary Policy Meeting held on September 17–18. At this meeting, the BOJ raised its policy interest rate from 1.00% to 1.25%.
Following the announcement, I have heard the following reaction.
“Hasn’t the government started to oppose interest rate hikes?”
Minoru Kiuchi, Minister of State for Economic and Fiscal Policy, attended this meeting on behalf of the government (Cabinet Office), and in the Summary of Opinions, he stated:
“The Bank of Japan should fulfill its accountability regarding this decision and thoroughly examine the cumulative effects of past interest rate hikes.
So, has the government really changed its stance?
“When a client asks, ‘Has the government started opposing interest rate hikes?’, how do you answer?”
In this article, I have analyzed the ‘Summary of Opinions’ since 2024, when the BOJ ended negative interest rates.
I compared the government’s comments between meetings where rates were held steady and meetings where they were raised, and I have organized how this time (September) differs from past rate hikes based on the original text.
To give the conclusion first, only one point has changed. I will take you through how to incorporate that one point into your asset allocation decisions.
■ Main Argument 1: The government only comments on interest rates when they are raised
What you need to grasp is the fact that government comments are completely different between meetings where rates are held steady and meetings where they are raised.
Looking at the period since 2024, when the BOJ ended negative interest rates, neither the Ministry of Finance nor the Cabinet Office has touched upon the policy interest rate at all during meetings where rates were held steady.
The Ministry of Finance reports on its own affairs and concludes by saying it ‘expects appropriate monetary policy management,’ while the Cabinet Office simply adds current risks to its economic assessment that the economy is ‘recovering moderately.’
They do not step into the level or direction of interest rates.
However, when it comes to a rate hike meeting, both ministries always mention the policy change and clearly voice their ‘requests’.
In other words, the government only says something about interest rates when the BOJ moves them. They are effectively silent when rates are held steady, and it is a regular occurrence for requests to be made at rate hike meetings.
■ Main Argument 2: The framework has not changed in three years. Only one word has changed
So, how has the ‘content’ of the comments during rate hikes changed? By lining up the original texts, the division of roles becomes clearly visible.
The Ministry of Finance’s stance has consistently been ‘careful explanation to the market’ and ‘consideration for government bond purchases (reduction)’ = the perspective of market stability and government bond absorption.
The Cabinet Office’s stance has consistently been ‘consideration for the economy and growth’ = the perspective of whether interest rate hikes might cool down the real economy.
This division of roles has not changed at all from the lifting of negative interest rates in March 2024 to the present.
The government only speaks up when interest rates are moved. Moreover, the framework of who says what has not changed for three years.
Furthermore, there are temporal changes in the phrasing.
The Ministry of Finance shifted from the approving words of 2024’s ‘we accept that it was judged necessary’ to from December 2025 onwards, ‘we would like you to make an appropriate judgment at this meeting’. It has retreated to a neutral expression that leaves the judgment to the Bank of Japan.
However, this did not start in September; it has been the pattern since the end of last year.
The Cabinet Office has expressed caution regarding the economy with every interest rate hike. In June 2026, it said ‘if excessive economic fluctuations occur, take independent and appropriate action’.
This September, it said ‘thoroughly examine the cumulative effects of past interest rate hikes’ and ‘consideration based on the neutral interest rate’.
Here, I will verify the ‘started opposing’ theory mentioned at the beginning.
What is the new element in this Cabinet Office comment that was not present during past interest rate hikes? Comparing the original text, it is essentially almost entirely the mention of the ‘neutral interest rate’ (the examination of cumulative effects is an extension of June’s ‘careful confirmation’).
The neutral interest rate is the level of interest rates that neither heats up nor cools down the economy. The Bank of Japan estimates this to be around 1.1–2.5% in nominal terms, and by raising it to 1.25% this time, it has exceeded the lower bound of the estimated range.
It can be read that the Cabinet Office included the implication, ‘Since it has already entered the range of the neutral interest rate, be more cautious from here on.’ This is certainly new. However, it is not ‘opposition to interest rate hikes,’ but rather ‘a request regarding the pace and level’.
■ Main Argument 3: What does this mean in the end?
What can be said from the main opinions of September 2026 is that the government is not opposing interest rate hikes. As before, it is merely requesting explanations to the market and checks on the economy.
If the Bank of Japan delays interest rate hikes, it is fully conceivable that inflation and the depreciation of the yen will accelerate, having a negative impact on the Japanese economy.
Especially at present, with global inflation being reignited and interest rate hikes beginning in the United States, it is fully conceivable that inflation and yen depreciation will accelerate in Japan.
In such a situation, it is difficult even for the government to judge what the correct monetary policy is.
Regarding the ‘one point that has changed’ in the title of this article.
The government’s basic line since the last interest rate hike remains the same.
If I had to point out what has changed, it is that they are only asking the Bank of Japan to make its decision on interest rate hikes “after careful consideration” (rather than asking them to stop the hikes). they are only asking the Bank of Japan to make its decision on interest rate hikes “after careful consideration” (rather than asking them to stop the hikes) is what can be said.
In short, it is highly likely that the Bank of Japan’s interest rate hikes will continue for some time. It is thought that the Bank of Japan’s rate hikes will end around the time global inflation subsides and the U.S. stops raising rates and begins considering rate cuts.
■ From the perspective of asset management
If the Bank of Japan continues to raise interest rates, it may continue to be a headwind for J-REITs.
Regarding foreign exchange, while Bank of Japan rate hikes lead to a narrowing of the Japan-U.S. interest rate gap, according to my calculations, what affects the dollar-yen rate is mostly U.S. interest rates rather than the Japan-U.S. interest rate gap.
Therefore, it may not be very realistic to expect that the Bank of Japan continuing to raise rates will mean the yen’s depreciation will stop.
■ Summary
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The government only mentions interest rates at rate-hike meetings. When rates are held steady, it is effectively no comment. Interpreting ‘orders were issued during a rate hike’ as ‘opposition’ is a misreading.
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The division of roles during interest rate hikes (Ministry of Finance = markets/government bonds, Cabinet Office = economy/growth) has remained unchanged since 2024.
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The new element in this September’s report is essentially almost entirely the Cabinet Office’s mention of the ‘neutral interest rate.’ It is not opposition to rate hikes, but rather requests regarding the pace and level.
■ Points to note
This article is a commentary based on the original text of the ‘Main Opinions’ and media reports, and does not definitively predict the end or timing of future interest rate hikes. The estimated values for the neutral interest rate are also the Bank of Japan’s estimates and should be viewed with a range in mind. Asset allocation is not a recommendation for a specific allocation, but rather an organization of perspectives for reading the current situation.
Thank you for reading to the end. Free articles become unavailable two days after publication, so if you would like to see past articles, I recommend joining the membership. Takenobu Nakajima’s Money.lab | Takenobu Nakajima (Former Bank of Japan employee, PhD in Mathematics from the University of Tokyo)
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