The BOJ decided to leave its policy rate unchanged at its 30 October Monetary Policy Meeting. The Outlook Report said that the underlying rate of inflation was broadly consistent with the 2% target for price stability, and indicated that the underlying rate of inflation had reached 2%. The Governor did not declare victory and suggested that the Bank intends to continue normalising policy.
At its Monetary Policy Meeting on 30 October, the BOJ left its policy rate unchanged. The Outlook Report released at the same time stated that the underlying rate of inflation was at a level broadly consistent with the 2% "price stability target." This marked the first indication that the underlying rate of inflation had reached 2%.
Since ending its negative interest rate policy in March 2024, monetary policy has pursued the normalisation of monetary policy by raising the underlying rate of inflation toward 2% while reducing monetary accommodation. The Governor reiterated his view that financial conditions remained accommodative and that the policy rate was below the neutral level, indicating that normalisation is expected to continue.
For the time being, however, the focus of policy will be on preventing the underlying rate of inflation from rising above 2%. The situation in the Middle East, AI demand and exchange-rate trends are being closely monitored as the 3 key inflation risks. While the Bank may continue raising rates at short intervals of around 3 months while the risks remain elevated, it is expected to return to a more gradual pace of rate increases if the risks recede.