Bank of Japan says inflation hit 2% target after 13 years, holds rates

30/10/2026 06:43 AST

The Bank of Japan said on Friday that inflation had reached its 2 percent target, more than 13 years after it adopted the goal to pull the economy out of deflation, but kept interest rates unchanged for now.

"Underlying CPI (consumer price index) inflation is at a level that is generally consistent with the price stability target of two percent, and is expected to remain at around that level," the central bank said. While core consumer inflation topped 2 percent at times in the early 2020s, it was the first time the BoJ had confirmed that the long-term price trend had been achieved.

The bank kept its key interest rate at 1.25 percent in an eight-to-one vote. The decision follows rate holds by the US Federal Reserve and the European Central Bank earlier in the week, but the BoJ is expected to raise rates in December as inflationary pressure builds.

Successive Japanese governments struggled for decades to escape deflation, a spiral of falling prices that hurts economic growth. The 2 percent target was set in 2013, when the BoJ launched massive monetary easing. Japan has seen sustained price rises since spring 2022, and the BoJ began raising rates in March 2024 after a decade of ultra-loose policy. Core inflation rose to 2.1 percent in September from 1.7 percent in August, government data showed last week.

The BoJ warned that inflation excluding fresh food "is likely to accelerate to a level clearly above two percent", driven by higher oil costs, rising semiconductor prices on global demand for artificial intelligence and the weaker yen.

"Further tightening looks very likely and we expect the policy rate to reach 2% by the middle of next year," said Marcel Thieliant of Capital Economics. "If anything, the risks are tilted towards further tightening thereafter."

AFP