Bank of Japan holds rate at 1.25%, says underlying inflation is generally at its 2% target

The decision was 8 to 1, with board member Hajime Takata dissenting in favor of a hike to around 1.5%, Kyodo and CNBC reported. Governor Kazuo Ueda said policy will increasingly focus on keeping underlying inflation firmly anchored around 2%, while noting that the target has yet to be achieved in a sustainable and stable manner, Kyodo reported.

In its outlook report, the BOJ raised its core inflation forecast for fiscal 2027 to 2.6% from 2.4% and kept its fiscal 2026 forecast at 2.5%, NHK and Kyodo reported. It raised its growth forecast for fiscal 2026 to 0.7% from 0.6% and cut its fiscal 2027 forecast to 0.7% from 0.8%. Kyodo and Nikkei Asia reported that the bank also decided to more than double the annual pace of its ETF sales from January 2027.

Why it matters: The BOJ set the 2% goal in 2013 to help end years of deflation. Its policy rate is at its highest level since 1995, CNBC reported, and NHK and Kyodo said Ueda cited the Middle East, AI-related demand and currency moves as risks to the outlook.