The Bank of Japan said the country’s core inflation was “generally consistent” with its 2% target, the first time it has made this assessment since adopting the target in 2013.
Before that, the BoJ used to say that core inflation was “approaching 2%.”
This comes as the central bank is expected to keep rates at 1.25%, still at their highest level since 1995.
The decision was split 8-1, with board member Hajime Takata dissenting. Takata wanted the bank to raise its policy rate to 1.5%.
The BOJ also raised its inflation forecast for its 2027 fiscal year from 2.4% to 2.6%, while the so-called “core” inflation forecast was also raised to 2.7% from 2.6%. Core-core inflation does not take into account the prices of fresh food and energy.
He also flagged a risk that core inflation could deviate upwards beyond 2%, saying “business behavior has been more oriented towards increasing wages and prices and that various factors could push prices higher.”
Krishna Bhimavarapu, Asia-Pacific economist at State Street Investment Management, describes this as a “hawkish stance.”
However, he also added that the country’s growth does not justify rushing the next steps.
Bhimavarapu forecasts that Japan’s GDP growth in the third quarter risks losing momentum, with consumption remaining the weakest link in the cycle.
A CNBC survey of 16 economists before the decision found that all expected the BoJ to lay the groundwork for a rate hike in December or January next year, as domestic inflation and wages continue to rise.
Thirteen respondents said they expected a final rate, or the level at which the BoJ should stop its tightening cycle, between 1.75% and 2% by mid-2027.
Japan is struggling with a weak yen and high energy prices that have driven up inflation.
However, experts told CNBC that the CPI numbers are being held back by the Takaichi administration’s energy subsidies.
The most recent inflation figures for September revealed that core inflation rose to its highest level in 2026, coming in at 2.1%, beating expectations.
Earlier this month, Finance Minister Satsuki Katayama reportedly told parliament that Japan was “on the cusp of a period of sustained inflation driven by rising wages.”
Inflation-adjusted wages in Japan rose for the eighth consecutive month in August, up 1.5% from a year earlier, according to the most recent government data, also indicating potential inflation driven by wage growth.
— CNBC’s Lisa Kim contributed to this report.
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