At its October Monetary Policy Meeting, the Bank of Japan acknowledged that underlying inflation had reached the target level and indicated that it would continue adjusting policy with a December rate hike in view while retaining flexibility. It also announced plans to substantially increase the pace of ETF sales.
At its 29–30 October meeting, the Bank of Japan judged that the underlying rate of inflation had reached a level broadly consistent with its 2% price stability target. This marked the first official acknowledgment that the target had been reached. Meanwhile, the target for the uncollateralized overnight call rate was left unchanged at around 1.25%, as expected by the market, with the vote passing 8–1.
The wording in the Outlook for Economic Activity and Prices was also revised, adopting language premised on underlying inflation having “reached” the target and describing its future trajectory. Medium- to long-term inflation expectations were also raised, with core CPI revised up to 2.6% and core-core CPI to 2.7%.
The annual sales of ETFs were sharply increased from approximately ¥330 billion to approximately ¥860 billion. The Bank of Japan indicated that sales would be measured on a book-value basis, equivalent to approximately ¥2.46 trillion on a market-value basis, and that the expected completion period would be shortened from 112 years to approximately 43 years.
Governor Ueda (植田) indicated that he would retain flexibility regarding a December rate hike and stressed the policy of continuing to carefully assess the persistence of underlying inflation. Although the stock market fell sharply during the day, he said that movements in AI-related stocks did not signify a change in the rate-hike policy.