BOJ October 2026: Holds at 1.25% as Takata Eyes 1.5%

The Bank of Japan kept its policy interest rate at 1.25% on 30 October 2026. Eight of the nine Policy Board members voted to hold. Naoki Takata dissented. He wanted to raise the rate by 0.25 points, to 1.5%.

The Bank also tripled the pace at which it is selling its holdings of exchange-traded funds (ETFs). In a separate report on the same day, it raised its inflation forecasts for the fiscal year ending March 2028.

The short-term policy interest rate is the uncollateralised overnight call rate. The Bank has raised it six times since July 2024, when it moved from a range of 0% to 0.1% to 0.25%. The most recent rise, to 1.25%, took effect in October 2025. We list all the meeting dates in BOJ Meeting Schedule.

Takata was the sole dissenter. He wanted to raise the rate by 0.25 points. This would have taken it to 1.5%. It would have been the seventh rise in the current cycle.

The statement repeated the forward guidance from July: "the Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation."

The Bank published its Outlook for Economic Activity and Prices alongside the decision. The October forecasts are the Policy Board members' median projections.

For fiscal 2026, the Board raised its GDP growth forecast to 0.7%, from 0.6% in July. CPI inflation excluding fresh food stayed at 2.5%. The Bank noted that the economy "is expected to continue growing moderately, albeit at a decelerated rate".

For fiscal 2027, the CPI forecast rose to 2.6%, from 2.4% in July. The Board also nudged up the core measure (excluding fresh food and energy) to 2.7%, from 2.6%. GDP stayed at 0.7%.

For fiscal 2028, CPI excluding fresh food stayed at 2.0%. The core measure edged up to 2.3%, from 2.2%.

The Outlook Report said "underlying CPI inflation is at a level that is generally consistent with the price stability target of 2 percent". Inflation expectations are "at around 2 percent". The Bank's estimate of Japan's potential growth rate is 0.5% to 1.0%.

The Bank tripled the pace at which it is reducing its ETF holdings. It had been selling gradually since the start of the current tightening cycle. The acceleration signals a faster unwind of the large asset portfolio built up during years of easing. We explain the background in Bank of Japan Bond Purchases.

The yen strengthened slightly after the decision. The dollar fell from ¥157.81 on 29 October to ¥157.34 on 30 October, a move of about 0.3%.

The decision came during the Tokyo trading session on 30 October. Takata's dissent was the main point of note. A lone vote for a rise suggests at least one Board member sees the current rate as too low.

The Outlook Report said the Bank "will continue to raise the policy interest rate". It flagged three risks: the situation in the Middle East, the expansion in AI-related demand and developments in foreign exchange rates.

On the balance of risks, the Board called economic risks "generally balanced". For inflation, it said "risks are skewed to the upside". The wage-price mechanism "has been operating". With wages and prices pushing each other higher, the Board sees a path toward sustained 2% inflation.

The report also noted a proposed temporary cut in the consumption tax on food and beverages. If enacted, it would reduce the CPI figures for fiscal 2027 by roughly 1.3 percentage points. The forecasts do not include this effect.

The October meeting left rates unchanged. The Board's higher inflation forecasts and Takata's push for 1.5% point to a rate rise at a coming meeting. The timing depends on the data.

The Bank kept its short-term policy interest rate at 1.25%. It has held at this level since October 2025. Eight of the nine Policy Board members voted to hold. Naoki Takata dissented. He wanted to raise the rate to 1.5%.

Takata wanted to raise the rate by 0.25 points, to 1.5%. The Bank's Outlook Report noted that inflation risks are skewed to the upside. Underlying CPI inflation is consistent with the 2% target. The dissent suggests he judged the current rate as too low given these conditions.

The Board's median forecast for CPI inflation excluding fresh food was 2.5% for fiscal 2026, 2.6% for fiscal 2027 and 2.0% for fiscal 2028. The fiscal 2027 figure rose from 2.4% in July. The Bank said underlying inflation "is generally consistent with the price stability target of 2 percent".