INSTANT VIEW-Investors react to BOJ raising interest rates to 31-year high

Sept 18 (Reuters) - The Bank of Japan raised interest rates to a 31-year high of 1.25% on Friday in a widely expected move to forestall risks of inflation overshooting its 2% inflation target.

At a two-day policy meeting that ended on Friday, the board decided by a 7-2 vote to raise its policy rate from 1%.

COMMENTS

HIROFUMI SUZUKI, CHIEF FX STRATEGIST, SMBC, TOKYO:

"The rate hike itself was in line with market expectations, but the two dissenting votes came as a modest surprise, as only some market participants had anticipated them.

"The outcome has somewhat tempered expectations for further rate hikes and conveyed a dovish impression.

"The pace of future rate hikes is likely to depend primarily on the views of the BOJ's leadership. We therefore do not expect the pace to differ significantly from current market expectations.

"The yen initially weakened following the decision, but attention now turns to Governor Ueda's inflation outlook and policy stance at the press conference."

FRED NEUMANN, CHIEF ASIA ECONOMIST, HSBC, HONG KONG:

"The tone of the statement, along with two dissenters on the decision to raise rates, leaves lingering doubts that Japan’s central bank will be cautious in tightening monetary policy further. In addition, new inflation numbers out this morning for August showed that price pressures remained unchanged in August, rather than accelerate."

"All eyes are now on the press conference to be held by Governor Ueda, with the market looking for hawkish reassurances that the BOJ is prepared to raise rates again soon. While back-to-back hikes appear unlikely, investors will look for clues as to whether officials are prepared to raise interest rates again in December. Given that the Fed has tilted into a more hawkish direction, the pressure remains for the BOJ to follow suit: Governor Ueda will have to follow-up today's rate hike with by keeping the door open for another hike before the end of the year."