The Bank of Japan kept rates unchanged on Thursday, maintaining short-term rates at 0.5%, while repeating its commitment to continue raising borrowing costs if the economy performs in line with projections.
Two board members — Naoki Tamura and Hajime Takata — dissented, again calling for a hike to 0.75%, signaling internal pressure toward normalization.
Although BOJ retained its medium-term outlook, the bank highlighted increased overseas risks that could weigh on Japan’s recovery, reinforcing a cautious stance. With inflation still elevated and macro conditions stabilizing, markets now see a strong probability of a December rate hike.
💬 Market Commentary
Norihiro Yamaguchi — Senior Japan Economist, Oxford Economics (Tokyo)
“The key question is whether Governor Ueda will signal an imminent hike. If downside risks from tariffs have eased, markets could quickly price in tightening — pushing JGB yields higher and strengthening the yen. We expect a hike to 0.75% in December, though delays remain possible depending on data and PM Takaichi’s policy stance.”
Fred Neumann — Chief Asia Economist, HSBC (Hong Kong)
“The BOJ is tip-toeing toward a hike. With inflation elevated and fiscal tailwinds building, it’s a matter of when, not if. Despite markets pushing expectations back, policymakers may tighten sooner rather than later.”
Hirofumi Suzuki — Chief FX Strategist, SMBC (Tokyo)
“This decision reflects BOJ’s own assessment, not political pressure.”
Key Takeaways
- BOJ holds rates at 0.5%
- Dissenting votes continue pushing for 0.75%
- Markets expect a possible December hike
- Yen and JGB yields may strengthen if tightening signals increase
- BOJ is moving cautiously amid global economic uncertainties