BOJ Holds Interest Rates at 1.25% in October; One Member Favours Hike
The Bank of Japan maintained its short-term policy rate at 1.25% at its October 30, 2026 meeting, in line with market expectations. The decision passed by an 8–1 vote, with one board member favouring a 25-basis-point increase to 1.50%.
For the first time since adopting its 2% inflation target in 2013, the BOJ said underlying inflation was “generally in line with the 2% target”. The central bank also raised its inflation forecasts and signalled that further interest-rate increases remain possible.
The decision indicates that policymakers are increasingly confident about achieving their inflation objective. The yen strengthened following the announcement, with USD/JPY declining approximately 0.24% to 157.34.
BOJ Accelerates ETF Sales; Markets Watch for December Rate Hike
Alongside its monetary policy decision, the BOJ announced faster sales of its exchange-traded fund holdings. The annual disposal pace on a book-value basis will increase from approximately ¥330 billion to ¥860 billion.
Most major investment banks continue to expect a potential 25-basis-point rate hike in December 2026. Citigroup expects the policy rate could eventually approach 2.0%, while Goldman Sachs expects further increases in January and July 2027.
Bank of America expects the policy rate could reach 1.75% in 2027. ANZ forecasts increases in December 2026 and March 2027, while Mitsubishi UFJ expects hikes in December 2026 and April 2027.
Investors are closely monitoring Governor Kazuo Ueda’s guidance for indications about the timing and pace of future monetary tightening.
Key takeaway: The BOJ maintained interest rates but delivered a hawkish signal by acknowledging that underlying inflation is broadly aligned with its 2% target. Accelerated ETF sales and expectations of a possible December rate hike indicate a gradual shift towards tighter monetary conditions.
What interest rate did the Bank of Japan maintain in October 2026?
The BOJ maintained its short-term policy rate at 1.25%.
What was the voting outcome?
The decision passed by an 8–1 vote, with one member supporting a 25-basis-point increase.
What did the BOJ say about inflation?
It said underlying inflation was generally in line with its 2% inflation target.
How much will the BOJ sell in ETFs annually?
The annual disposal pace on a book-value basis will increase to approximately ¥860 billion from ¥330 billion.
When is the next BOJ rate hike expected?
Several major investment banks expect a possible rate increase in December 2026, although the timing remains uncertain.
