The central bank indicated that upcoming increases to its short-term interest rate will likely help stabilize price pressures and boost spending for Japanese households. Bank of Japan officials stated that the country’s current interest rate is still below the neutral level, signaling that further monetary tightening is necessary to ensure that inflation remains around its target without overshooting and damaging the economic recovery.

Following a policy meeting on Oct 30, the BoJ held its benchmark rate at 1.25% in an 8-1 vote, dismissing a proposal from board member Hajime Takata to raise the target to 1.5%. While Governor Kazuo Ueda noted that underlying inflation is now broadly consistent with the 2% price stability goal for the first time since 2013, he stopped short of formally declaring the target achieved until it is sustainably maintained. The bank also moved to accelerate the sale of its ETF holdings to approximately $5.5 billion per year.