BOJ Holds Rates at 1.25%, Signals Hawkish Path as Traders Eye December or January Hike

The Bank of Japan kept its short-term policy target at 1.25% on Friday by an 8-1 vote, with board member Hajime Takata dissenting, while revising up its inflation forecast and reaffirming its readiness to keep raising borrowing costs. The BOJ's recognition that underlying inflation, excluding temporary factors, has reached its 2% target marked a significant shift from prior assessments, analysts said. Governor Kazuo Ueda is due to hold a news conference at 3:30 p.m. (0630 GMT). Hirofumi Suzuki, chief FX strategist at SMBC in Tokyo, said the revision to the BOJ's ETF sales pace is unlikely to move markets given the 43-year disposal timeline, and noted that tighter global financial conditions from French developments and falling US equities have left the BOJ under no pressure to rush a hike. Masahiko Loo, chief fixed income strategist at State Street Investment Management, called the decision a "boring hold, hawkish direction," with the debate now centered on where the terminal rate lands — his base case around 1.75%.