BOJ likely to lift inflation outlook but hold rates steady amid oil-price surge

Four insiders familiar with the Bank of Japan’s deliberations indicate that the central bank will modestly raise its core-inflation forecast for fiscal 2027 to account for the renewed surge in oil prices, yet it is likely to leave the policy rate at the 1.25 % level during the two-day meeting concluding on Oct. 30. The BOJ, which raised rates last month to a 31-year high, will monitor the yen’s trajectory, as a further depreciation could amplify import-price pressures.

In its upcoming quarterly report, the bank is expected to highlight persistent inflationary risks while maintaining its growth projections of about 0.6 % for fiscal 2026 and 0.8 % for 2027, buoyed by strong AI-related exports. The report will probably omit the pending consumption-tax cut on food, since the related legislation has not yet passed parliament. Officials will stress that inflation remains near the 2 % target and that second-round effects are not yet evident, but they will keep the option of another rate increase open, potentially by December. Analysts anticipate the BOJ could raise rates twice more, aiming for a terminal rate near 1.75 % to 2 % by mid-2027.