The Bank of Japan declared that core inflation in the country was “generally consistent” with its 2% target, the first time it made that assessment since adopting the target in 2013. Before this, the BOJ used to say that core inflation had been “approaching 2 percent.” This comes as the central bank was expected to keep rates at 1.25%, still at their highest level since 1995. dissent. Takata wanted the bank to raise its official interest rate to 1.5%. The BOJ also raised its inflation forecast for its fiscal 2027 to 2.6% from 2.4%, and the so-called “core” inflation forecast also rose to 2.7% from 2.6%. “Core” inflation excludes fresh food and energy prices. He also flagged the risk of core inflation drifting upwards beyond 2%, saying that “business behavior has shifted more toward increasing wages and prices and there are several factors that could push prices up.” Krishna Bhimavarapu, APAC economist at State Street Investment Management, described this as a “hard hold” and said the BOJ sees more increases ahead and is increasingly confident the target is being achieved through a “self-sustaining cycle of wages, prices and consumption.” that the country’s growth does not justify rushing the next step. Bhimavarapu forecasts that Japan’s third-quarter GDP growth is likely to lose momentum, with consumption remaining the weakest link in the cycle. A CNBC poll of 16 economists ahead of the decision found that all respondents expected the BOJ to lay the groundwork for a rate hike in December or January next year, as domestic inflation and wages continued to rise. Thirteen respondents said they expect a terminal rate, or the level at which the BOJ is expected to stop its tightening cycle, of 1.75% to 2% by mid-2027. Japan has been grappling with a weak yen and high energy prices that have raised inflation. However, experts have told CNBC that CPI numbers are being kept low due to the Takaichi administration’s energy subsidies. The latest inflation figures for September revealed that core inflation reached its highest level in 2026, reaching 2.1% and exceeding expectations. Earlier this month, Finance Minister Satsuki Katayama reportedly told parliament that Japan was “about to move into a period of sustained inflation driven by rising wages.” Japan’s inflation-adjusted wages rose for the eighth consecutive month in August, rising 1.5% from a year earlier, according to the latest government data, also indicating possible inflation driven by wage growth. CNBC’s Lisa Kim contributed to this report.
