Bank of Japan monetary policy decision, Thursday, October 30, 2025.
Summary:
The Bank of Japan held its short-term rate at 0.5% by a 7–2 vote, with Takata and Tamura dissenting in favour of a hike. Inflation forecasts were steady, growth modest, and the BOJ signalled patience amid trade and global uncertainty.
-----
The Bank of Japan held its short-term policy rate at 0.5% on Thursday, maintaining an accommodative stance as the board weighed rising inflation expectations against persistent global and trade-related uncertainties.
- The decision was made by a 7–2 vote, with board members Toyoki Takata and Naoki Tamura dissenting in favour of a 0.75% rate, arguing that conditions justified a gradual move toward neutral policy settings.
- In explaining their dissent, Takata said Japan had “shifted away from a deflationary norm” and largely achieved the price stability target, while Tamura noted that “upside risks to prices” warranted bringing policy closer to neutral. The majority, however, opted to stay patient, emphasising the need for clearer confirmation that wage growth and inflation are sustainably aligned.
The BOJ’s latest projections kept core CPI forecasts unchanged at 2.7% for fiscal 2025,
- 1.8% for 2026,
- and 2.0% for 2027,
while real GDP growth is seen at 0.7%,
- 0.7%,
- and 1.0%,
respectively, a largely steady outlook from July.
Policymakers described exports and output as moving sideways, with consumption holding firm despite external headwinds. The central bank expects growth to slow modestly due to weaker overseas demand and trade policy friction, though it still anticipates a mechanism in which wages and prices rise together.
In its quarterly report, the BOJ said underlying inflation will likely stagnate in the near term amid slower growth but should gradually firm to levels consistent with the 2% target through fiscal 2027.
- The board judged economic risks as skewed to the downside,
- while inflation risks were broadly balanced.
- It flagged the uncertainty surrounding trade policy and its potential spillovers to global prices and markets as key risks requiring vigilance.
The central bank reiterated that real interest rates remain deeply negative, and pledged to raise rates further only if economic and price trends continue to align with projections.
- It also noted that exchange-rate movements are exerting a greater impact on prices as firms become more active in passing costs through to consumers.
While the BOJ’s baseline scenario assumes moderate inflation, it warned that both wages and prices could deviate upward, should corporate behaviour accelerate the wage-price cycle. The policy statement also acknowledged lingering uncertainty over foreign exchange, import costs, and global commodity prices, underscoring the need for flexibility and data dependence in policy calibration.
Bolding above is mine.
---
Still to come, Bank of Japan Governor Ueda press conference at 0630 GMT
- 0230 US Eastern time
