Bank of Japan holds rates steady, leaves door open for future hikes

The Bank of Japan (BOJ) kept its policy rate unchanged at 1.25 percent, in line with expectations. For the first time since 2013, the bank stated that price increases are generally in line with its inflation target, sending a strong signal regarding future interest rate hikes.

The interest rate decision was taken with an 8-to-1 vote, with board member Hajime Takata dissenting by arguing that the rate should be raised to 1.5 percent. The current 1.25 percent interest rate remains the highest level recorded since 1995.

Economists' expectations are focused on the BOJ beginning its interest rate hike cycle in December or January. Experts project that the tightening cycle could reach a terminal level in the 1.75 percent to 2 percent range by mid-2027.

In Japan, September core inflation reached 2.1 percent, hitting a 2026 peak, while inflation-adjusted wages rose for the eighth consecutive month in August. While a weak yen and high energy costs increase inflationary pressures, government-implemented energy subsidies continue to stabilize consumer prices.