BOJ Holds Rates at 1%, Warns Inflation May Exceed Target

The Bank of Japan (BOJ) held its benchmark interest rate at 1%, maintaining its current monetary policy stance while warning that underlying inflation could exceed its official target.

This marks an important shift in the central bank's outlook and has strengthened market expectations that additional interest rate increases could follow if inflationary pressures continue to build.

The BOJ's assessment of underlying inflation represents a change in communication, as central banks rarely signal upside inflation risks unless they believe price pressures are becoming increasingly durable.