BoJ Holds Rates, Signals Further Hikes Ahead

2026-10-30 03:09 By Farida Husna 1 min. read

The Bank of Japan kept its short-term policy rate unchanged at 1.25% in an 8-1 vote at its October meeting, in line with market expectations.

The decision followed two consecutive 25bp hikes in June and September, leaving borrowing costs at their highest level since April 1995.

Policymakers indicated further rate increases, noting that underlying CPI inflation had aligned with the 2% target for the first time since the target was set in 2013, while financial conditions remain accommodative.

Persistent labor shortages also sustain a moderate wage-price cycle, while inflation expectations stay around 2%.

Board member Hajime Takata dissented, arguing that inflation had reached the target and warranted faster hikes toward the neutral rate.

In its quarterly outlook, the BoJ maintained its FY2026 inflation forecast at 2.5% but raised its growth projection to 0.7% from 0.6%.

For FY2027, the board lifted its inflation forecast to 2.6% from 2.4% but trimmed its growth outlook to 0.7% from 0.8%.



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BoJ Holds Rates, Signals Further Hikes Ahead
The Bank of Japan kept its short-term policy rate unchanged at 1.25% in an 8-1 vote at its October meeting, in line with market expectations. The decision followed two consecutive 25bp hikes in June and September, leaving borrowing costs at their highest level since April 1995. Policymakers indicated further rate increases, noting that underlying CPI inflation had aligned with the 2% target for the first time since the target was set in 2013, while financial conditions remain accommodative. Persistent labor shortages also sustain a moderate wage-price cycle, while inflation expectations stay around 2%. Board member Hajime Takata dissented, arguing that inflation had reached the target and warranted faster hikes toward the neutral rate. In its quarterly outlook, the BoJ maintained its FY2026 inflation forecast at 2.5% but raised its growth projection to 0.7% from 0.6%. For FY2027, the board lifted its inflation forecast to 2.6% from 2.4% but trimmed its growth outlook to 0.7% from 0.8%.
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