The Bank of Japan (BOJ) decided on October 30 to keep its key rate at 1.25%. Eight of the nine board members voted for this — only Hajime Takada opposed, proposing to raise the rate to 1.5%.
This week, supporters of tighter monetary policy at both the Bank of Japan and the US Federal Reserve pushed for rate hikes. However, both regulators chose caution.
Why one BOJ member insisted on accelerating
Takada justified his position by saying that core inflation had already reached the 2% target. In his view, this means the bank is entering a new phase, and therefore the rate should be brought to a neutral level more quickly so that the regulator can respond promptly to changing conditions.
"He proposed setting the next rate for money market operations: the Bank will aim to keep the uncollateralized overnight rate at around 1.5%. The majority rejected this proposal."
The two board members who opposed a rate hike in September did not express a particular opinion this time. Toichiro Asada and Ayano Sato previously believed there were no grounds for raising the rate. On Friday, both voted to keep the level unchanged.
The bank's updated forecast notes that core inflation is already roughly in line with the 2% target. The core inflation forecast for fiscal 2027 has been raised from 2.4% to 2.6%, while the bank sees risks of accelerating price growth.
This forecast is consistent with recent data: in September, Japan's core inflation exceeded 2% for the first time in nine months. In addition, the board unanimously voted to more than double the pace of ETF sales starting in January 2027.
Market participants now await changes in December. According to a survey conducted earlier this month, 54 of 78 economists predicted that the rate would rise to 1.5% in this very quarter, with the majority naming the December meeting.
Fed holds rate, Canada hikes
The Bank of Japan's decision came two days after the outcomes of meetings in Washington and Ottawa were announced. In both cases, inflation concerns influenced the discussion.
On October 28, the Fed kept its target rate range at 3.75–4% with a vote of 10 to 2. Fed board member Lisa Cook and Cleveland Fed President Beth Hammack favored a quarter-point hike. The pause came a month after the September rate hike.
The Fed believes inflation remains elevated. Further decisions will depend on new data. Traders now expect a rate hike in December — according to CME FedWatch, the probability of such an event is 74.9%.
On the same day, the Bank of Canada raised its key rate to 2.5% — the first hike since July 2023. The agency explained that high oil prices have kept the consumer price index (CPI) at around 3% since April. According to the bank's forecast, inflation will approach 3.5% by the end of the year.
"Further rate increases may be necessary, but due to uncertainty the Governing Council decided to act cautiously."
December will be a month of several decisions at once. The Fed and the Bank of Canada will announce their decisions on December 9, and the Bank of Japan will hold meetings on December 17 and 18. The outcome of each will largely depend on oil price dynamics.
Cryptalist analysis: The synchronous pause by the BOJ and the Fed amid tightening rhetoric creates a "delayed volatility" scenario for the crypto market: the December meeting window will become a key trigger for risk assets. The BOJ's continued accommodative stance supports a weak yen and carry trade, which has historically been favorable for liquidity in high-risk assets, including bitcoin. However, the rising probability of a December hike in the US to 74.9% limits the rally's potential — institutional investors will remain cautious until the rate trajectory is confirmed.