The Bank of Japan kept policy at 1.25% and said underlying inflation finally matched its 2% goal, the first such acknowledgement since the target was set in 2013.

Tokyo – The Bank of Japan left its short‑term policy rate unchanged at 1.25%, the highest level since 1995, and declared that underlying inflation is now generally consistent with its 2% target – a milestone it has not claimed since the target was introduced in 2013.

Policy decision and voting split

• The rate decision was approved 8‑1; board member Hajime Takata dissented, arguing for a 1.5% rate.
• The BOJ’s “core‑core” inflation forecast for FY2027 was raised to 2.7% from 2.6%, while the overall inflation outlook moved to 2.6% from 2.4%.

Implications and market outlook

• State Street APAC economist Krishna Bhimavarapu called the move a “hawkish hold,” suggesting further hikes may follow as wages and prices gain momentum.
• A CNBC poll of 16 economists expects a rate hike in December or January, with a terminal rate of 1.75‑2% projected for mid‑2027.

What traders are watching

• Whether underlying inflation stays near 2% or drifts higher, as the BOJ warned of upward pressure from wage‑price dynamics.
• Upcoming CPI data and the next policy meeting, where a shift to a rate increase could reshape yen‑related pairs and gold (XAU/USD).

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This article is compiled from international market news for information only. It is not investment advice.