BOJ October decision: a pause at 1.25% with a December hike in view
Every economist in a CNBC survey expects the Bank of Japan to hold at 1.25% on Friday, but the bank may declare its 2% underlying inflation goal met, keeping a December or January hike in play as the yen trades near 157.7.
Japan's central bank raised rates in September to the highest level in 31 years. The BOJ October decision on Friday is expected to be a pause, but the wording around it could matter more for the yen than the rate itself.
What happened
All 16 respondents in a CNBC survey expect the policy rate to stay at 1.25% at the end of the two-day meeting, and all of them expect the next increase in December or January. Thirteen see a terminal rate of 1.75% to 2% by around mid-2027.
The pressure to keep tightening is visible in the data. Core inflation excluding fresh food rose 2.1% in September, its highest this year, and inflation-adjusted wages rose 1.5% in August, the eighth straight monthly gain, CNBC reported. A key gauge of services inflation climbed 3.7% in September, according to a separate CNBC report on Tuesday.
Daiwa Securities thinks policymakers will judge that the 2% underlying inflation mark has now been hit, moving the goal from lifting prices to keeping them stable, investingLive reported. Daiwa also sees the Outlook Report lifting the fiscal 2026 growth forecast to 0.8% from 0.6% and fiscal 2027 core inflation to 2.5% from 2.4%, and expects board member Hajime Takata to dissent in favor of a hike, as he did in July.
Why it matters
The yen weakened 0.16% to 157.73 per dollar on Tuesday, giving back some of last week's safe-haven gains, CNBC said. Nine of those surveyed see the currency holding in a 157-158 band for the coming month. Ebury analysts said traders see a December increase as a little more likely than not, leaving room for a yen rebound if Governor Kazuo Ueda sounds hawkish.
Bond yields are a constraint. The 10-year JGB yield stood at 2.809% and the 30-year at 3.829%, and most respondents expect both to rise by year-end. Lombard Odier's Homin Lee said there may not be enough consensus on the board for back-to-back hikes given fragility in the bond market. A hawkish BOJ October decision would also matter for Asian equities, which swung sharply in the mid-October chip selloff, and it caps a week that includes the Fed, the ECB and the Bank of Canada decision.
What's next
Watch three things on Friday: whether the statement says inflation has reached 2%, the number of dissents, and whether Ueda shifts from meeting-by-meeting language toward the next meeting. Any of those would read as hawkish, Daiwa said. A cautious tone could trim December pricing and leave the yen soft after the BOJ October decision. The survey details are in CNBC's BOJ poll.
The call
We say the Bank of Japan will leave its policy rate unchanged at its October meeting. Polymarket's "No change in Bank of Japan’s interest rates after the October 2026 meeting?" market priced Yes at 98% at 08:21 MSK on Oct. 27. Every economist CNBC polled expects a hold, and the debate is about December, not this week.
This article is for information only and is not investment advice. Calls are editorial forecasts, logged with market odds at the time of publication and kept on the record.