Bank of Japan Holds Rates and Declares Inflation Victory

The Bank of Japan maintained its policy interest rate at 1.25% on October 30 following a two-day policy meeting. In a significant policy shift, the central bank declared victory in a 14-year effort to reach its 2% underlying inflation target, stating that current levels are generally consistent with this goal.

While the majority of the board voted to hold rates steady, board member Hajime Takata dissented and proposed an increase to 1.5%. The bank signaled a transition toward a more hawkish phase, suggesting that rate hikes could occur as early as December to anchor inflation and mitigate risks stemming from energy shocks and the AI boom.

As part of its broader strategy, the central bank announced it will accelerate the sale of exchange-traded funds beginning in January. The pace of these sales will increase to 860 billion yen per year, up from the previous rate of 330 billion yen.