Bank of Japan holds rates steady even as inflation ticks up

The Bank of Japan held rates steady even as inflation ticks up again and is now above the central bank’s target rate for core consumer price increases.

It kept its policy rate — the uncollateralized overnight call rate — at 1.25%, as it concluded a two-day policy meeting on Friday.

Given that the last move higher was just in September, analysts and investors widely expected that the bank would sit tight this time.

The BOJ also released its quarterly report on the economy and prices on Friday, and the report indicated that underlying inflation in Japan has reached the bank’s 2% target. The BOJ has said its job from now on is to anchor inflation at that level.

The 2% inflation target was first introduced in 2013, under the leadership of then-Gov. Haruhiko Kuroda, Gov. Kazuo Ueda’s predecessor. At the time, Kuroda pledged to achieve the 2% target in two years, but it eventually took 13 years to get there.

Japan’s headline inflation stayed above 2% for 45 consecutive months between April 2022 and December 2025, but the BOJ maintained that underlying inflation — which excludes price movements that might be temporary — remained below 2%.

Inflation topped 2% in Japan for the first time this year in September, according to government data released last week. The data showed that consumer prices rose 2.1% year over year that month.

Inflation excluding volatile fresh food also stood at 2.1%, the highest since December last year and matching a forecast by analysts. The reading excluding both fresh food and energy was 2.4%.

Ueda is scheduled to give a news conference later on Friday.