BOJ Holds at 1.25% as All Week's Dissents Push for Higher Rates

The Bank of Japan (BOJ) left its policy rate unchanged at 1.25% on October 30, with an 8–1 vote. Board member Hajime Takata cast the lone dissenting vote, proposing an increase to 1.5%.

Throughout this week, every dissenting voice at both the BOJ and the US Federal Reserve (Fed) called for tighter policy. The Bank of Canada (BoC) went a step further by actually raising its rate.

Why One BOJ Member Wants to Move Faster

In the BOJ's statement, Takata argued that underlying inflation has already hit the 2% target. He believes this constitutes a new phase for monetary policy. As a result, he contends the bank should raise rates toward neutral more quickly to maintain flexibility.

“He proposed that the Bank set the guideline for money market operations as follows: the Bank would encourage the uncollateralized overnight call rate to remain at around 1.5 percent. The proposal was defeated by a majority vote,” the statement read.

The two members who voted against the September hike did not dissent this time around. Toichiro Asada and Ayano Sato had previously argued that the data did not support higher rates. On Friday, both voted in favor of holding.

Meanwhile, the BOJ outlook indicated that underlying inflation is now broadly aligned with its 2% target. It revised its fiscal 2027 core inflation forecast up to 2.6% from 2.4%, citing upside risks to prices.

That view matches recent data. Japan's core inflation exceeded 2% in September for the first time in nine months. The board also unanimously agreed to more than double the pace of its ETF sales starting January 2027.

Markets are now looking to December for the next possible move. In a Reuters poll earlier this month, 54 of 78 economists predicted a hike to 1.5% this quarter, with most naming the December meeting.

The Fed Waits While Canada Raises Rates

The BOJ's decision came two days after rate announcements in Washington and Ottawa, with inflation concerns playing a key role in both.

On October 28, the Fed held its target range at 3.75% to 4% in a 10–2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack sought a quarter-point increase. The pause followed a September rise by one month.

The Fed stated that inflation remains elevated and that additional data will inform its next decision. Traders now anticipate a December hike, with CME FedWatch showing a 74.9% probability after the decision.

That same day, the BoC raised its policy rate to 2.5%, marking its first increase since July 2023. The bank cited high oil prices for keeping CPI inflation near 3% since April, and it expects inflation to hit around 3.5% by year-end.

“There could be a need to increase the policy rate further, but given uncertainties, Governing Council agreed to proceed carefully,” the press release added.

Consequently, December is now packed with a series of decisions. The Fed and the BoC will both announce on December 9, while the BOJ meets on December 17 and 18. Oil prices may play a decisive role in how many of those meetings conclude with a hike.