At its October meeting, the Bank of Japan left its short‑term policy rate unchanged at 1.25% in an 8–1 decision, matching market expectations. The hold came after two consecutive 25 bp hikes in June and September, which had already pushed borrowing costs to their highest level since April 1995.
Policymakers reaffirmed their intention to continue raising rates, noting that underlying CPI inflation remains broadly in line with the 2% target and that overall financial conditions are still accommodative. The sole dissent came from Board member Hajime Takata, who argued that inflation has effectively reached the target and that a quicker pace of rate increases toward a neutral level is therefore justified.
In its quarterly outlook, the BoJ kept its FY2026 inflation forecast unchanged at 2.5% but upgraded its GDP growth projection to 0.7% from 0.6%, citing resilient domestic demand and continued policy support. For FY2027, the Bank raised its inflation forecast to 2.6% from 2.4%, while slightly lowering its growth forecast to 0.7% from 0.8%.
