The Bank of Japan kept its policy rate at 1.25% by an 8-1 vote on Friday, with board member Hajime Takata dissenting in favour of a hike to 1.5%. The bank said Japan’s core inflation has reached its 2% target for the first time since 2013.
The central bank raised its 2027 headline inflation projection to 2.6% from 2.4%, and its core projection to 2.7% from 2.6%. The 1.25% rate is the highest since 1995.
Economists expect a hike soon
All 16 economists in a CNBC survey expected a rate hike in December or January. Thirteen respondents expected the terminal rate to reach 1.75% to 2% around mid-2027.
Krishna Bhimavarapu, Asia Pacific economist at State Street Investment Management, said the BoJ sees room for further hikes. The bank is “increasingly confident the inflation target can be achieved through a self-sustaining wage-price-consumption cycle,” he said.
Wages and energy costs in focus
Real wage growth was 1.5% year on year in August, the eighth consecutive month of increase. Core inflation hit 2.1% in September, the highest reading this year.
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Yen weakness and high energy prices pushed inflation higher. Energy subsidies under the Takaichi government restrained consumer prices, sources said.
Source: Bank of Japan
