The Bank of Japan's minutes from last month's policy meeting confirmed that its policy priority has shifted toward preventing inflation from exceeding its target level. At that meeting, the central bank raised its policy rate to the highest level since 1995.

The minutes, which did not disclose the identities of speakers, showed that one member said the central bank has entered a new phase of policymaking aimed at preventing inflation from surpassing the 2% target. For the previous 13 years, the central bank had been working to gradually guide price growth toward that level. Another member said it was necessary to formulate policy to avoid excessive inflation. The minutes came from the policy meeting held on September 17-18 and were published on Thursday.

The policy board led by BOJ Governor Kazuo Ueda voted 7-2 to raise the interest rate to 1.25%. The hike came just three months after the previous increase in June, marking the shortest interval between two rate increases since 1990.

The minutes provided the Bank of Japan with an opportunity to present key views, and the latest report overall displayed a persistently hawkish tone, aside from the views of some dissenting members. Members noted that the neutral interest rate may be higher than current estimates; that many companies believe the impact of rate hikes so far has been limited; and that it is desirable to raise the policy rate further at an early stage.

The minutes may further strengthen market expectations that the Bank of Japan will raise rates again this year. Before the minutes were released, swap markets showed that traders believed the probability of another rate hike by the end of December was above 95%, while the probability of a hike at the central bank's next policy meeting on October 30 was about 21%. A Cabinet Office representative, possibly Economic Security Minister Minoru Kiuchi, said the policy board should continue to monitor the impact of previous rate increases.