Bank of Japan Confirms 2% Inflation Target Met After 13 Years, Holds Rate at 1.25%

The Bank of Japan said Friday that underlying consumer price inflation is generally consistent with its 2% price stability target, marking the first confirmation of the long-term trend since the goal was set in 2013. The central bank kept its key interest rate unchanged at 1.25% by an eight-to-one majority vote, following similar moves by the U.S. Federal Reserve and the European Central Bank. Core inflation in September stood at 2.1%, up sharply from 1.7% in August, according to government data released last week. The BoJ warned that the year-on-year rise in CPI excluding fresh food is likely to accelerate clearly above 2%, citing higher oil costs, rising semiconductor prices tied to global AI demand, and yen depreciation. Prime Minister Sanae Takaichi's government has been more cautious, with Economy Minister Minoru Kiuchi saying last week, "We're not there." Japanese officials are expected to hike in December as inflationary pressure builds. Capital Economics' Marcel Thieliant said further tightening "looks very likely," projecting a 2% policy rate by mid-next year.