BOJ holds at 1.25%, says inflation meets 2% target — SkimNews
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- BOJ held its policy rate at 1.25%, maintaining its highest level since 1995, as underlying inflation was assessed as 'generally consistent' with the 2% target for the first time since 2013
- BOJ upgraded its FY2027 inflation forecast to 2.6% from 2.4% and raised its 'core-core' inflation forecast to 2.7%, excluding fresh food and energy prices
- Hajime Takata, a BOJ board member, dissented in an 8-1 vote, advocating for a rate hike to 1.5% instead of holding steady
- BOJ warned that underlying inflation risks moving above 2%, citing a shift in firms' behavior toward raising wages and prices as a potential upward driver
- State Street's Krishna Bhimavarapu described the decision as a 'hawkish hold', noting the BOJ sees more rate hikes ahead but is not rushing due to weak consumption momentum
- CNBC survey of 16 economists found unanimous expectation that the BOJ will set the stage for a rate hike by December or January, with most predicting a terminal rate of 1.75%–2% by mid-2027
Why it matters: The BOJ’s shift from 'approaching' to 'consistent with' its 2% target marks a pivotal moment in ending decades of deflationary policy. With wage growth now feeding inflation for eight straight months and firms increasingly raising prices, the central bank is closer than ever to normalizing rates—though consumption weakness delays the next move.
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