Bank of Japan keeps rates steady, signals December hike if wages rise

During its monetary policy meeting on October 30, the Bank of Japan (BOJ) announced it would keep interest rates unchanged at 0.5%.

However, a rate increase could come as soon as December, Governor Kazuo Ueda said in a press conference, citing U.S. trade tariffs and a slowdown in wage growth as economic challenges.

The BOJ’s decision matched expectations, with the board holding the short-term rate at 0.5%. Two board members, Naoki Tamura and Hajime Takata, dissented, repeating their call to raise the rate to 0.75%. Governor Ueda said the bank wants “a bit more data” to judge whether companies will continue raising wages and stressed that he does not need to wait for the final outcomes of spring labor talks to make a decision.

Ueda’s comments came after the central bank roughly maintained its baseline outlook for growth and inflation. The quarterly report slightly raised the growth forecast for the current fiscal year and kept the view that underlying inflation would reach 2% in the latter half of the three-year projection period through fiscal 2027.

The BOJ raised rates to 0.5% in January as inflation stayed above target. With price growth exceeding 2% and the economy on a moderate recovery path, many economists expect policy rates to rise to 0.75% by the end of March.

The debate has sharpened as the U.S. Federal Reserve cut rates on October 29 by a split vote. Fed Chair Jerome Powell said the bank will review the data before deciding on further rate cuts, with the next meeting scheduled for December.

Markets fell today following decisions by the Federal Reserve and the meeting between Trump and Xi, where they announced lower tariffs and a resolution on the rare earths conflict. Sentiment remains cautious amid economic challenges related to inflation, the U.S. government shutdown, and employment concerns.

Bank of Japan keeps rate at 0.5%, signals possible December hike