Bank of Japan Set to Hold Rates at 1.25%, Signals Possible December Hike

The Bank of Japan is expected to keep its policy rate steady at 1.25% at its two-day meeting ending Friday, while signaling that underlying inflation is approaching its 2% target and that further rate hikes may come as soon as December. In its quarterly outlook, the BOJ will likely revise up next fiscal year's price forecast and indicate that underlying inflation has roughly reached 2%, sources told Reuters. Governor Kazuo Ueda's post-meeting remarks will be scrutinized for the pace and timing of future hikes. Most analysts polled by Reuters expect the BOJ to raise rates to 1.5% in December, with a terminal rate projected around 1.75% to 2%. Core consumer inflation exceeded the 2% target in September for the first time in nine months, as elevated fuel costs from the prolonged Middle East conflict offset government subsidies. The BOJ raised rates in September following a June hike, a shorter interval than in 2024 and 2025.