BOJ Leaves Benchmark Unchanged: Updated Oct. 31, 2025

BOJ leaves benchmark interest rate unchanged at policy meeting

Article source: https://mainichi.jp/english/articles/20251030/p2g/00m/0bu/016000c

Ideas

The Bank of Japan is very conservative, like other central banks, and is not going to do anything that might cause harm to the economy or the financial markets.

At the same it knows it's stuck between a rock and a hard place related to continued inflation and the US tariff situation and doesn't really know what to do at the present time.

Yes the US trade policy situation has the global market trying to figure out how to react or respond to the situation and again many companies are still uncertain about what to do at the present time.

The weak Japanese yen can be over a positive and a negative for Japanese companies and Japanese who invest in other global markets.

Its a positive for Japanese export companies as they can get more profits from their overseas sales but its a negative for Japanese importers as a weak yen increases the price of import into Japan.

Yes, for a very long time the Bank of Japan, with the former governor, felt that the Japanese economy was just too weak to increase the key rate as it might have significant negative effects on the economy.

And now too, it seems the new Prime Minister might be thinking the same thing as any increase in the rate might not be good for the Japanese economy at this time.

But a rate increase in either December or January is like a lifetime for the economy and a lot can happen either in a positive or negative way before that time. 

Normally, when core consumers prices remain at or above the 2 percent level, central banks might actually start to increase the rate as a strategy to try and get inflation down. 

But in years past, especially since the pandemic the BOJ has resisted increasing the key rate, as they felt the economy was just too weak, but they did begin to increase the rate slowly a while ago.

But again the BOJ is caught between deciding what do to do between the US tariff situation, which might require a rate decrease and the continued inflation in the economy, which usually requires a rate increase.

The Japanese economy might be considered a mature economy as mature economies normally don't grow that much and an increase of 0.7 or 06 percent would be about what a mature economy should grow.

Core consumer prices, for most Japanese families are just too much at this time as they have continued to increase since the pandemic with no real signs or them decreasing or even leveling off.

The fiscal 2027 period is a long way off and anything can happen and a decrease in inflation might happen but then again it might not happen as the BOJ might just be estimating what is going to happen as again, a lot can happen before the fiscal 2027 period.

Unfortunately, the US, these days, seems to be in the habit of interfering in the affairs of other countries as suggesting a country should curb its inflation and or curb excessive currency volatility remains out of bounds for normal diplomatic actions.

Yes, the gap between the two countries and their respective rates might have cause the Japanese yen against the US dollar to appear very weak.

A US rate decrease reduces US key rate and decreases the different between the US rate and the Japanese rate which should reduce the pressure on the Japanese yen some, but it won't reduce the rate that much.

While many central banks, globally, usually follow what the US Federal Reserve does with either a rate increase or rate decrease, the Bank of Japan hasn't followed what the US central bank does exactly as it does what it feels is best for its economy and not what the US does.

Have a nice day!