Bank Of Japan (BOJ) Holds Rate At 1.25% And Raises Fiscal 2027 Inflation Forecast
The BOJ held its rate at 1.25% and raised its fiscal 2027 inflation forecast to 2.6%, while approving faster sales of its stock funds.
The bank kept its short-term interest rate at around 1.25% on 30th October, while raising its inflation forecast for fiscal 2027 and approving faster sales of its exchange-traded funds, or ETFs.
The monetary policy statement records eight votes for the rate hold and one against. Board member Hajime Takata wanted the rate raised to around 1.5%. He argued that underlying inflation had reached the bank's 2% target and that the pace of interest-rate adjustment should increase. Reuters independently reported the decision and his dissent.
The new Outlook Report put the median forecast for consumer inflation excluding fresh food at 2.6% in fiscal 2027, up from 2.4% in July. The growth forecast for the same year edged down to 0.7% from 0.8%. These projections exclude the proposed temporary consumption tax cut on food and beverages.
The bank said underlying inflation was broadly consistent with its target, but warned of a greater risk of prices rising above it. It identified higher energy costs, the yen's earlier depreciation and demand for artificial intelligence equipment as sources of price pressure. AI demand was also supporting exports, according to the report.
The bank said it still intended to raise rates, with the timing and pace depending on economic activity, prices and financial conditions. It described financing conditions as accommodative, noting that companies' funding costs remained low relative to their profitability overall.
A separate unanimous vote changed how quickly the bank will sell its ETF holdings. From January 2027, the annual pace will rise from about ¥330 billion to ¥860 billion, measured at book value. The bank said it had been selling the funds since January 2026 without a major market impact, while stock-market trading had expanded. The new pace corresponds to about 0.1% of market trading value, compared with about 0.05% under the earlier plan.
The ¥860 billion sales pace uses book value, rather than the funds’ current market value. The statement puts its equivalent at about ¥2.46 trillion in market value using the ratio observed in its earlier sales. The bank's disposal reference retains flexibility to adjust or suspend sales as market conditions change, alongside its stated aim of avoiding destabilising effects.
