Bank of Japan Sets Interest Rate at 1.25 Percent

The Bank of Japan set its overnight call-rate guideline at approximately 1.25 percent during its October 29–30 meeting. The decision passed in an 8-1 vote, though one Policy Board member proposed a higher guideline of 1.5 percent.

Policymakers remain divided on the timing and pace of future hikes as they weigh inflation progress against demand risks. Some board members view underlying inflation as consistent with the 2 percent target, while others project the consumer price index, excluding fresh food, will rise more than 3 percent by the fiscal year-end.

Internal concerns persist regarding the potential for rate increases to restrain housing and fixed investment, as well as the impact on household spending. The central bank intends to monitor spring wage negotiations next year to determine if the cycle of wage and price increases will persist. The next policy meeting is scheduled for December 17–18, 2026.