BOJ Sticks to Inflation Message, Keeps Rates Unchanged

The BOJ left rates at 1.25% last week and is now reiterating that underlying inflation matches its 2% goal. The central bank seems to be convincing itself that action may be due.

The BOJ's latest quarterly outlook report contained the following points:

• Rate increases could ease inflationary pressures and support household consumption.
• Underlying inflation has risen to about 2% and has become more entrenched in recent years.
• Long-term and super-long-term real interest rates have climbed recently.
• The bank closely scrutinises stock and foreign exchange movements when evaluating financial conditions.
• It will consider a broad set of economic data and surveys, not any single indicator, to assess Japan's financial environment.

The inflation projections in the report support the view that price pressures are building, echoing last week's comments.

For fiscal 2027, core inflation is forecast at 2.6%, up from 2.4% in July.