BOJ Says Inflation Has Reached 2% Target, Holds Policy Rate at 1.25%

Further Rate Hikes to Continue

December Increase Seen as Likely

The Bank of Japan held its policy rate at 1.25% and said inflation has effectively reached its 2% target for the first time in 13 years. The central bank said Japan is shifting away from a prolonged period of deflation toward an economy where wages and prices rise together.

In a statement after its monetary policy meeting on October 30, the BOJ said underlying inflation, excluding temporary factors, had "reached a level that is broadly consistent" with its 2% goal. It marks the first time the bank has made that assessment since adopting the price stability target in January 2013.

The BOJ kept its benchmark rate at 1.25% by majority vote of its nine-member policy board. The decision reflects the bank's intention to assess how its September rate increase affects the economy and prices.

Board member Hajime Takata proposed raising the policy rate to 1.5%, but the motion was rejected by a majority. Under former Governor Haruhiko Kuroda, the BOJ launched an ultra-loose monetary policy in 2013 centered on large-scale Japanese government bond purchases to achieve 2% inflation. That effort took longer than expected as entrenched deflationary mindsets proved difficult to break.

The BOJ said it is now important to confirm whether inflation can settle at around 2% from the standpoint of achieving the price stability target in a sustainable and stable manner. Given that current monetary conditions remain accommodative, the bank said it will continue to raise the policy rate and adjust the degree of monetary easing in line with economic, price and financial conditions.

Markets are increasingly betting the BOJ will raise rates again at its next monetary policy meeting in December.

In its economic and inflation outlook report released the same day, the BOJ said underlying inflation would remain around 2% in the coming years. It raised its forecast for consumer prices excluding fresh food in fiscal 2027 by 0.2 percentage point to 2.6%, citing the lagged impact of higher global oil prices since this summer on consumer inflation.

The central bank also revised up its growth outlook. It lifted its forecast for real gross domestic product growth in fiscal 2026, which runs from April 2026 to March 2027, to 0.7% from 0.6%. It said expanding global demand for artificial intelligence would support corporate earnings. By contrast, it lowered its fiscal 2027 growth forecast to 0.7% from 0.8%.

Choi Man-su, Tokyo correspondent, Korea Economic Daily bebop@hankyung.com