No change in Bank of Japan’s interest rates after the October 2026 meeting?

Analysis

The Bank of Japan raised its key rate by 25 basis points to 1.25% on September 18, a 31-year high, and did it on a 7-2 vote. Two dissenters, reportedly on the dovish side, resisted even that step. A board that split over one hike is not an obvious candidate for a second a few weeks later. Timing expectations point the same way. Former board member Makoto Sakurai said on September 24 that the bank should raise roughly once every three months, with the next move in December and a terminal rate around 2% by about June next year. Still, the door is not shut. Governor Ueda reportedly did not rule out back-to-back hikes or a 50 basis point move, and said the pace would be decided meeting by meeting. Yen weakness and fuel-driven inflation add pressure, and the Federal Reserve is also tightening. October is the meeting with the Outlook Report. Sakurai reportedly indicated that December is the more likely timing unless the inflation forecast revision is very large. That is the hinge. A sharp upward revision to the inflation outlook, or a further slide in the yen, would make a surprise at the October 29 to 30 meeting far more plausible.