Bank of Japan (BoJ) Governor Kazuo Ueda is addressing the press conference, explaining the reason behind leaving the key interest rate unchanged at 1.25% in the October policy meeting.

BoJ press conference key highlights

Japan’s economy expected to continue growing moderately.

Mid- to long-term inflation expectations are at around 2%.

Underlying CPI inflation at level generally consistent with 2% price stability target, expected to remain at around that level.

We need to watch impact of FX, AI and Middle East.

Japan’s financial conditions are accommodative.

Various government measures stimulated economy to lead to 2% price target being met.

Government measures, easy monetary conditions seen to firmly support economy.

BoJ will continue to raise policy rate and adjust degree of monetary easing in response to economic actity, prices and financial condition developments.

Bank will consider adjustment of timing, pace on monetary policy while looking at likelihood of achieving economic, price outlook. Baseline scenario as well as risks to those outlook.

Stabilising underlying inflation at level around 2% is important.

All members agreed that underlying inflation has reached 2%.

More important than ever that underlying inflation is not allowed to overshoot 2% target.

Will monitor various data to gauge whether trend inflation has stabilised.

Will closely monitor whether mid- and long-term inflation expectations will be anchored around 2%.

The section below was published on October 30 at 3:00 GMT to cover the Bank of Japan’s monetary policy announcements and the initial market reaction.

The Bank of Japan (BoJ) board members decided to leave the short-term interest rate unchanged at 1.25% following the conclusion of its two-day monetary policy review meeting on Friday.

The decision aligned with the market expectations.

Summary of the BoJ’s Monetary Policy Statement

Board’s core CPI fiscal 2026 median projection at 2.5% vs 2.5% in July. 

Underlying inflation has hit levels in line with price target. 

BOJ board member Takata dissented on rate decision. 

Board’s core-core CPI fiscal 2027 median projection at 2.7% vs 2.6% in July. 

Core inflation likely to stay near levels consistent with price target.

Risk underlying inflation could exceed price target. 

Core inflation hits levels generally aligned with price target. 

Must monitor risk of inflation rising unexpectedly, causing negative effects on economy later. 

Risks to prices tilted toward upside. 

Will keep raising interest rates amid economic, price and financial condition changes. 

Will consider timing, pace of rate increases with focus on chances of economy, prices aligning with baseline scenario and risks. 

Set sales pace at about 860 billion yen annually on book value basis. 

Medium- to long-term inflation expectations near 2%. 

Crucial to anchor core inflation near 2% target. 

Companies’ conduct shifting more toward increasing wages, prices. 

Will implement monetary policy as needed to sustainably and stably meet inflation goal. 

Must prevent risk of inflation rising above target from materialising, exerting negative impact on economy later. 

Risks to economic activity remain broadly balanced. 

Real interest rates have risen recently but short-term rates stay low. 

Interest rate burden is sufficiently low for firms compared to profits. 

Demand for corporate funds is rising. 

Financial institutions’ lending stance stays active. 

Middle East conflict, growth in AI demand, FX volatility and their economic, price impact warrant attention. 

Unlike past focus on downside price risks, Japan now faces risk of inflation overshoot. 

No major distortions observed in Japan’s financial activity. 

Long-term inflation expectations hover near 2%.

To speed up sales of ETF holdings to about 860 billion yen from previous about 330 billion yen. 

Underlying inflation likely to stay at levels aligned with Bank of Japan target. 

Proposed tax cut would reduce core CPI by 1.3 percentage points in fiscal 2027. 

BoJ Report on Risks

Vigilance remains necessary over impact of higher crude oil procurement costs on economy and prices.

Price pass-through in B2B transactions from high crude oil costs, AI-driven demand, forex likely to push consumer prices higher. 

If AI earnings don’t grow with investment, adjustment pressure could occur alongside asset price shifts. 

Recent surge in grain prices amid geopolitical tensions in Middle East and global weather conditions warrants attention as potential concern. 

Insufficient labor-to-capital substitution amid shortages may curb growth rate. 

Market reaction to the BoJ policy announcements

The Japanese Yen (JPY) attracts some buyers following the Bank of Japan’s rate hike decision. At the press time, the USD/JPY pair is down 0.20% on the day to trade at 157.40.