With inflation nearing the Bank of Japan's 2% price stability target, the question of whether to raise rates further will be the focus of the October meeting. The latest data and wage trends are examined.
On 16 October, Governor Ueda (植田) said that underlying inflation had come quite close to the Bank of Japan's 2% price stability target. He explained that expanding demand related to AI, labor shortages and rising raw material prices were pushing up inflation.
The Bank of Japan raised its policy rate to 1.25% in September, and its next Monetary Policy Meeting will be held on 29 and 30 October. The focus of the meeting will be whether the increase in prices is being driven by temporary factors or whether inflation will become firmly established at around 2% on a sustained basis, accompanied by wage growth.
According to the latest data, the Corporate Goods Price Index (CGPI) rose 6.8% year on year in September 2026. The Import Price Index, which has been affected by the weaker yen, was up 24.5% year on year as of September. Nationwide consumer prices rose 1.9% year on year in August, while the all-items index excluding fresh food rose 1.7%. The preliminary September CPI for Tokyo's 23 wards showed a 2.7% year-on-year increase in the all-items index excluding fresh food.
To determine whether its price stability target has been achieved on a sustained basis, the Bank of Japan will need to assess not only the impact of raw material prices but also wage growth, private consumption and the extent to which companies are passing higher costs on to prices. Wage trends and the outlook for the economy and prices will be the focus going forward.
Factors relevant to a decision on an additional rate hike include the extent to which wages can support consumption, the sustainability of companies' price pass-through, the effects of the weaker yen and higher oil prices, and the impact of past rate hikes on capital investment and households. The 29–30 October meeting may provide an indication of the direction of monetary policy.