Analysts react to BOJ decision to keep rates steady

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Raindrops cover a sign with the Bank of Japan logo outside the central bank’s headquarters in Tokyo, Japan, October 26, 2026. REUTERS/Kim Kyung-Hoon
FILE PHOTO: Bank of Japan Governor Kazuo Ueda speaks at a press conference after a BOJ policy meeting in Tokyo, Japan, September 18, 2026. REUTERS/Kim Kyung-Hoon/File Photo
A man walks past the headquarters of the Bank of Japan in Tokyo, Japan, October 26, 2026. REUTERS/Kim Kyung-Hoon

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Oct 30 : The Bank of Japan kept interest rates steady on Friday, but revised up its inflation forecast and stressed anew its readiness to continue pushing up borrowing costs to forestall mounting inflation risks.

The central bank decided to maintain its short-term policy target at 1.25 per cent by an 8-1 vote. Board member Hajime Takata dissented to the decision, instead calling for a 1.5 per cent hike.

Governor Kazuo Ueda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

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MASAHIKO LOO, CHIEF FIXED INCOME STRATEGIST, STATE STREET INVESTMENT MANAGEMENT, TOKYO:

"A boring hold, but an important shift in the Outlook Report. The BOJ's recognition that underlying inflation is now around 2 per cent brings its assessment closer to the reality that conventional inflation measures have already been around or above target for much of the past four years.

"Taking its cue from the Fed and ECB, the BOJ has little reason to rush, particularly with US midterm elections potentially adding volatility across currencies and bonds. Ueda can stay data-dependent, keep every meeting live and preserve the next hike for around the turn of the year.

"Bottom line: boring hold, hawkish direction. The debate is no longer whether the BOJ normalises, but where terminal lands. Our base case remains around 1.75 per cent as Japan joins the synchronised global tightening cycle."

Source: Reuters

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