The Bank of Japan is expected to leave its policy rate at 1.25%, regard a declaration of reaching 2% as a rite of passage, begin its next rate hike in December and continue raising rates every 3–4 months thereafter. While the recent sharp fall in share prices could lead to a prolonged market correction, it is considered too early to make that judgment.
At a press conference following its October Monetary Policy Meeting, the Bank of Japan left its policy rate unchanged at 1.25%, as the market had expected. The point that drew attention was its statement that the underlying rate of inflation had reached a level broadly consistent with the 2% target. The declaration that the target had been reached came after an extended period of developments.
The article points out that the declaration came too late. Actual CPI inflation exceeded 2% for four consecutive years from 2022 through 2025, while there were periods in 2026 when it fell below 2% from January through August, reportedly due to the government’s energy measures. Excluding special factors, the Bank of Japan’s core CPI is said to have remained above 2% for five consecutive years. The press conference also addressed the gap between perceptions and statistics.
Looking ahead, the next rate hike is expected to begin in December, with further hikes continuing once every 3–4 months. Some voices are concerned that the recent sharp fall in share prices could spread into a prolonged market correction, but it is considered too early to make that judgment at present.