BOJ Holds Rate Steady Amid Rising Inflation Expectations

The Bank of Japan (BOJ) has decided to maintain its policy rate at 1% despite rising inflation expectations. In an 8-1 vote, the BOJ's decision was made with the expectation that core inflation will surpass its 2% target from the second half of fiscal 2026.

The central bank cited wage increases being passed on to selling prices, higher crude oil prices, and the yen's recent depreciation as factors contributing to the expected acceleration in core inflation. Core inflation was 1.6% in July, remaining below 2% for most of 2026.

BOJ board member Hajime Takata proposed raising the rate to 1.25%. The BOJ stated that it would continue to raise the policy interest rate as underlying inflation approaches 2% and financial conditions remain accommodative.

Analysts are closely watching Governor Kazuo Ueda's communications for signals on whether future rate increases could accelerate. Some reports suggest that Tokyo intervened in the foreign exchange market to strengthen the yen, alongside US authorities conducting a 'rate check'.