The Bank of Japan opted to leave interest rates unchanged on Thursday, but reiterates its commitment to gradually raise borrowing costs if the economy evolves in line with its forecasts — a move that has shifted investor attention toward the likelihood of an increase as soon as December.
This outcome aligns with forecasts compiled by Reuters, with the decision coming amidst a persistent streak of inflation exceeding the central bank’s 2% target for the past 41 consecutive months.
In a split verdict, the BOJ’s policy board voted seven to two in favor of keeping short-term rates at 0.5%. Board members Naoki Tamura and Hajime Takata advocated for a 25 basis-point hike.
Following the widely anticipated decision, the yen depreciated, slipping by 0.2% to 153.03 against the dollar. Japanese 10-year government bond yields held steady, and the Nikkei 225 advanced by 0.4%.
The central bank’s stance emerges at a time of ongoing weakness in Japan’s export sector. While exports shrank for four consecutive months, a modest rebound was recorded in September; however, shipments to the United States have continued to decline.
The BOJ maintained its guidance that underlying inflation will reach 2% in the latter part of its three-year forecasting period through fiscal 2027, mirroring the language in its July report.
