The Bank of Japan kept its interest rate unchanged at 0.5%

The BOJ decided to maintain its target for the unsecured overnight call rate (the policy rate) at 0.5%. This marks the sixth consecutive meeting since the January meeting, when it raised the rate to 0.5%. The BOJ will continue to monitor the impact of US tariffs on the Japanese economy.

Of the nine policy board members, Takada and Tamura opposed maintaining the rate. Following their September proposal, they again suggested raising the rate to 0.75%, but this was rejected due to majority opposition. Takada argued that the “price stability target has been largely achieved,” while Tamura pointed out that “the risk of rising prices is increasing.”

Regarding the US economy, the BOJ believes the impact of tariffs has not yet become apparent, but they could potentially drag down employment and consumption in the future. There are concerns that if the global economy slows, Japanese companies’ profits will decline, and the momentum for wage increases next year will weaken.

Due to the government shutdown, which has suspended the release of economic statistics, the actual situation of the US economy is difficult to ascertain. Many within the Bank of Japan still believe further observation is necessary.

The October meeting also finalized the “Economic and Price Situation Outlook (Outlook Report),” updated every three months. It presented updated forecasts for the growth rate of real GDP (Gross Domestic Product) and the year-on-year increase in the Consumer Price Index (CPI) excluding fresh food for each fiscal year from 2025 to 2027.

The meeting maintained its view that the impact of tariffs would lead to a temporary slowdown in growth, which would then recover. Regarding the timeline for achieving the 2% price stability target, the forecast for the latter half of fiscal year 2026 to fiscal year 2027 was also maintained.

The market believes a December rate hike is highly likely. Statistics from the Eastern Research Institute and Eastern ICAP show that, based on market forecasts, the probability of a rate hike as of the morning of the 30th was 60% for the December meeting, 22% for January 2026, and 14% for March. How Governor Ueda will articulate the rate hike policy is also attracting considerable attention.

According to the median forecast from the policy committee, real GDP is projected to grow by 0.7% in both 2025 and 2026, and by 1.0% in 2027. Consumer prices excluding fresh food are projected to grow by 2.7% in 2025, 1.8% in 2026, and 2.0% in 2027. The 2025 real GDP growth forecast has been revised upwards by 0.1 percentage points, a minor adjustment.