BOJ Holds Rates but Signals Hawkish Stance as Underlying Inflation Meets Target

English summary

The Bank of Japan held its policy rate at 1.25% on Friday but confirmed in its outlook report that underlying consumer inflation has largely met the 2% target, raising the FY2027 core CPI forecast to 2.6%. The decision passed by an 8-1 vote, with member Takata proposing a hike to 1.5%, and announced accelerated ETF sales starting in 2027. This hawkish combination supports the yen near 157.60, pushes up short-term yields, and solidifies market expectations for a December rate hike.