Bank of Japan leaves rates unchanged in October

BOJ keeps rates steady: On 29–30 October, the Bank of Japan (BOJ) decided by a seven-to-two vote—as in its last meeting—to keep its policy rate at 0.50%, extending the pause in its hiking cycle from subzero rates that began in March last year. The decision was the first made by the BOJ since Sanae Takaichi became prime minister in late October.

Trade and wage uncertainty continues to drive pause: The decision to hold was widely expected by analysts. In comments to the press made after the decision, Governor Kazuo Ueda indicated that the BOJ needs more certainty about the performance of the U.S. economy, which affects Japan’s exports and currency. Ueda also said the BOJ wants more time to assess incoming data about Japanese wages, a major driver of inflation.

Our Consensus Forecast stays stable: Our panelists’ forecasts for Japan’s policy rate at the end of this year have remained largely stable since early May. Most of our panelists see the BOJ raising its policy rate by 25 basis points at its final 2025 meeting on 18–19 December. This aligns with the BOJ’s forward guidance that it will “continue to raise” its policy rate, assuming its outlook for GDP growth and inflation is realized. For 2026, our panelists have also kept their forecasts steady, with the majority seeing the Bank of Japan raising rates by a further quarter point, probably in the latter half of the year.

Panelist insight: ING’s Min Joo Kang and Chris Turner commented: “The US and Japan signed a trade deal this week, and several other Asian countries are expected to finalise agreements with the US around the APEC summit. South Korea has already done so; recent talks have also resulted in reduced tariff rates for China [...]. We believe that recent developments will provide the Bank of Japan with more confidence over the coming months, and in turn, the chance to finally pivot to delivering a rate hike in December.” Goldman Sachs analysts stayed hawkish vs the rest of our panel: “We maintain our base case scenario of the next rate hike being in January next year. By the time of the January 2026 MPM, the BOJ would have accumulated information on how the US economy would evolve, and would have also accumulated sufficient information on next year's shunto wage negotiation, which the BOJ focuses on. That said, we see some risk that rate hike could come earlier, in December.”

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