HighIV Macro Policy & Sovereign Debt30 October 2026, Friday · 06:02 TRT (UTC+3)
Bank of Japan says it has hit its price goal, opening the door to December
The Bank of Japan held its policy rate at around 1.25% on 30 October in an 8–1 vote. It said underlying inflation had reached the 2% target. Most analysts in a Reuters poll expect 1.5% in December.
Hajime Takata dissented and proposed lifting the rate to around 1.5%. In his view, with underlying inflation at target, the bank should move faster towards a neutral rate. The board unanimously raised the pace of ETF sales from roughly 330 billion yen a year to 860 billion yen. The new pace starts in January 2027 and equates to about 2.46 trillion yen at market value.
The binding constraint is no longer deflation but a policy rate that trails inflation. With the rate at 1.25%, Tokyo's mid-October inflation came in at 2.8%, or 2.6% excluding fresh food and energy. The bank raised its fiscal 2027 forecast for CPI excluding fresh food from 2.4% to 2.6% and left fiscal 2026 at 2.5%. Ueda said on 30 October that the bank must stay alert to the risk of overshooting. He added, however, that 2% had not yet been reached on a sustainable basis.
The poll cited by Reuters puts the terminal rate at 1.75–2%. The dollar closed at 157.804 yen on 29 October, and the 10-year JGB ended that day at 2.876%. The 30 October closing yield could not be verified. Nor could the current swap-implied probability of a December hike. The full Outlook Report is due on 2 November and the summary of opinions on 10 November.
Talay assessment
Bottom line
The BoJ stayed on hold, but by saying the target is in sight it shifted the debate from whether to hike to when. Takata's dissent and the higher 2027 forecast make December the most likely date. The uncertainty lies in Ueda's sustainability caveat: the bank could cite volatility in the yen and JGB market and push the move to the following meeting.
Likely effects
- Japanese front-end ratesNegativeWeeks
As pricing for a December move to 1.5% settles in, the two-year yield stays sensitive to policy expectations and funding costs face upward pressure.
- Japanese equitiesUncertain1–6 months
Lifting ETF sales to 860 billion yen a year at book value adds a standing source of supply from January 2027; the bank kept the right to suspend sales if needed.
- Global bond yieldsNegative1–6 months
With the Fed and the ECB close to hiking, a BoJ moving the same way opens a channel that could shrink Japanese institutions' demand for foreign bonds.
- TürkiyeNegative1–6 months
If yen-funded positions shrink, carry demand for emerging-market debt declines; Türkiye's external borrowing conditions are affected indirectly through this channel.
Possibilities, ranked
- 11.5% in December65%
The bank emphasises upside risk and raises the rate by 25 basis points in December; Takata's reasoning spreads to the majority.
Watch: Number of pro-hike views in the 10 November summary of opinions
- 2Move slips to January 202725%
The board chooses to wait for wage data and holds again in December on an 8–1 or similar split.
Watch: Wage and risk language in the full Outlook Report on 2 November
- 3Market stress delays the timetable10%
An equity sell-off or a sharp yen move pushes the bank to wait, and the hike slips beyond the first quarter of 2027.
Watch: A sudden move in dollar/yen and the Nikkei resembling August 2024
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Policy rate▲ 1.25%
- ETF sales (annual, book value)▲ ¥860 billion
- FY2027 CPI forecast▲ 2.6%