BoJ Holds Rate at 1.00%, Dissent and Guidance Keep October Hike in Play

CPI inflation is likely to accelerate clearly above 2% in the second half of fiscal 2026 before easing back toward the target as oil effects dissipate, the report said. The mechanism in which wages and prices rise moderately in interaction with each other will be maintained, allowing underlying inflation to converge with the bank's price stability objective.

The forward guidance carried the strongest signal. The BoJ reiterated that risks to the CPI outlook are skewed to the upside. It warned that inflation could deviate upward to a level above 2% as firms continue raising wages and prices. The bank stated explicitly that it will continue to raise the policy interest rate and adjust the degree of monetary accommodation while assessing economic activity and prices along with financial conditions. Policymakers highlighted the Middle East, AI-related global demand and exchange-rate developments as key uncertainties.

The decision was less about the unchanged rate than about reinforcing the direction of travel. The BoJ stopped short of signalling when the next move will come, but it made clear that further normalization remains the baseline, not just a possibility. The next policy meeting is scheduled for October.

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