The Bank of Japan kept its policy rate at 1.25% on Friday, October 30, and said underlying inflation was broadly in line with its 2% target for the first time since it adopted the target in 2013.
The decision passed by 8–1. Board member Hajime Takata voted against it and proposed raising the rate to 1.5%. The bank said it needed more time to assess the effects of earlier rate increases, rather than raise borrowing costs again right away.
In its October outlook, the bank raised its forecast for core inflation in fiscal 2027 to 2.6%, from 2.4% in its previous projection. It warned that energy prices, demand related to artificial intelligence and exchange-rate movements, among other factors, could push prices higher. The BOJ expects underlying inflation to remain around 2%.
But it said it would be important to assess whether price growth remains close to that level. This assessment marks a change in the bank’s wording after years of saying underlying inflation was approaching its target. The decision to hold rates does not rule out further increases.
Governor Kazuo Ueda stressed that the bank remains alert to the risk of inflation rising above its target, leaving the timing of any next move undecided.