The Bank of Japan opted to leave its benchmark interest rate at 1.25 per cent, though board member Hajime Takata dissented by calling for an immediate bump to 1.5 per cent. Policymakers also announced an unexpected acceleration of exchange-traded fund sales, raising the annual divestment pace to 860 billion yen starting in January. In addition, the central bank revised its core consumer inflation projection upward to 2.6 per cent for the fiscal year ending in March 2028. A majority of Reuters-surveyed analysts now project another rate hike will occur before the end of the year.
Key points
Central bank officials have entered a more hawkish policy phase that leaves room for a bo…: Central bank officials have entered a more hawkish policy phase that leaves room for a borrowing cost increase as early as December.
Persistent price pressures fueled by elevated energy costs and a weaker yen continue to p…: Persistent price pressures fueled by elevated energy costs and a weaker yen continue to pose a threat to domestic household consumption.
Most analysts surveyed by Reuters anticipate the benchmark rate will reach 1.5 per cent b…: Most analysts surveyed by Reuters anticipate the benchmark rate will reach 1.5 per cent before the close of the year, with further increases in 2025.
Sources checked by our analysis pipeline: 1
TOKYO: The Bank of Japan kept interest rates steady on Friday (Oct 30), but declared victory in a nearly 14-year battle to hit its price target and signalled vigilance against inflationary risks, suggesting scope to hike borrowing costs as soon as December.
With underlying inflation having roughly hit 2 per cent, the BOJ must focus on anchoring it around the target, the central bank said, stressing anew that its policy has entered a new, more hawkish phase open to raising rates once every few months.
The pivot aligns the BOJ with its US and European counterparts eyeing near-term rate hikes to battle inflationary risks from the AI boom and the Iran war-induced energy shock.
"Underlying inflation is at a level generally consistent with our price target, and is expected to remain at around that level," the BOJ said in a quarterly outlook report. "Against this backdrop, it will be important to examine the degree to which underlying inflation is anchored around 2 per cent."
At the two-day meeting ending on Friday, the BOJ maintained its policy rate at 1.25 per…
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