BoJ Preview: Two Rate Rises This Year, Yet the Yen Still Trades Near 157 per Dollar

The Bank of Japan ends its next two-day policy meeting on Friday 30 October and, as usual, gives no fixed time for the announcement. It has raised its short-term policy rate twice this year: to 1.0% on 16 June and to 1.25% on 18 September, the second step coming only three months after the first. October's meeting also brings the quarterly Outlook for Economic Activity and Prices, which carries the bank's new forecasts.

For currency traders, the puzzle is the yen. Two rate rises have not lifted it much. USD/JPY closed Friday at 156.81, almost exactly where it ended the day of the September hike, at 156.86. It spent most of October between about 157.5 and 158.9, before a sharp drop on Thursday 22 October when US yields fell. A gap of roughly 2.5 to 2.75 percentage points still separates US and Japanese short-term rates, which keeps the dollar attractive to hold.

Japan's Ministry of Finance has already stepped in once this year. Its monthly figures show ¥15,399.3 billion of foreign exchange intervention between 30 July and 26 August, and none from 27 August to 28 September. The ministry publishes the daily breakdown only in its quarterly report, so it has not yet said on which days it acted. Market data show USD/JPY fell from a high of 163.74 to a low of 157.92 on 30 July, the first day of that period.

What the BoJ said in September

September's statement left little doubt about direction. With underlying inflation “approaching 2 percent” and financial conditions still accommodative, the bank said it “will continue to raise the policy interest rate and adjust the degree of monetary accommodation”, while weighing “the timing and pace of adjustment”. It named three things to watch: the situation in the Middle East, the expansion in AI-related demand and developments in foreign exchange rates.

A new kind of risk was flagged as well. Underlying inflation, the board said, could “deviate upward to a level above the price stability target”, because firms are shifting toward raising wages and prices and medium- to long-term inflation expectations are rising. For a central bank that spent years trying to lift inflation, that is a notable change of emphasis.

Not everyone agreed. Two of the nine board members, Asada Toichiro and Sato Ayano, voted against the rise. Asada argued that with core inflation below 2% recently, the economy could not necessarily be called strong. Sato said economic and price developments had not substantially accelerated, so a rise was not appropriate at that time.

The Summary of Opinions: a shift in phase

The Summary of Opinions, published on 1 October, lists comments from board members without names. One said that with underlying inflation now “getting closer to 2 percent”, keeping it stable there becomes important, adding: “In that sense, it is considered that there has been a shift in the phase of monetary policy.”

Another member went further: “If signs of an upward deviation in prices are observed, the Bank will need to accelerate the pace of rate hikes.” A third wanted to bring the rate “closer to the approximate goal relatively soon”, leaving room to move in either direction if the economy surprises.

Others urged care. One opinion said underlying inflation “does not seem to be accelerating at a speed that could lead the Bank to fall behind the curve, so there is no need to take hasty action”. The summary also noted that the September rise came sooner after June than earlier steps had, because the economy had been “more resilient than expected”.

Taken together, the board looks set on more rises but divided on speed. That split matters for Friday: a move only six weeks after the last would shorten the gap between hikes again, so most of the debate is about whether October is too soon rather than whether rates go higher.

What has changed since September

Inflation data have moved the hawks' way. Japan's Statistics Bureau reported that core consumer prices, which exclude fresh food, rose 2.1% in the year to September, up from 1.7% in August. A narrower gauge that also leaves out energy climbed to 2.4% from 1.9%. Government fuel measures, including the gasoline tax change, held the headline down by about 0.82 percentage point, so the underlying trend is firmer than the headline suggests. Our Japan CPI story has the breakdown.

Tokyo's October prices, an early guide to the national figure, arrive at 08:30 Tokyo time on Friday, which is 23:30 UTC on Thursday, only hours before the decision. A further rise in the core reading there would strengthen the case for acting now.

Abroad, the backdrop is mixed. US Treasury yields fell sharply on 22 October, and the 10-year closed the week at 5.00% against 5.13% on Wednesday, according to the US Treasury. Lower US yields narrow the gap with Japan and tend to help the yen, which is one reason USD/JPY fell from about 158.1 to 156.5 that day. The Fed's own decision, two days before the BoJ's, will shape that gap again.

Rates and votes from the Bank of Japan's statements. Currency closes are UTC days built from hourly market data and differ slightly between providers.

Three ways Friday could go

These are our scenarios, not forecasts from the bank, and the market reactions are typical patterns rather than predictions.

• Raise to 1.5%. A quarter-point step like June and September would surprise on timing rather than direction. The yen would likely gain at first, though September showed such gains can fade within hours: on the day of that hike, USD/JPY swung between 156.11 and 158.05.
• Hold, with a firm message. If the Outlook Report raises the inflation forecasts and the statement repeats that rates will keep rising, traders would look to the 18 December meeting. That could support the yen without a move.
• Hold, with a cautious message. Stress on Middle East risks or slower growth would push expectations of the next rise into 2027. The yen could weaken, and attention would turn to whether the Ministry of Finance steps in again.

Governor Ueda's press conference, held later in the day in Tokyo, often moves the yen as much as the decision itself. Listen for how he describes the pace of future rises and whether he mentions the exchange rate.

What it means for yen traders

• Set alerts rather than watching the clock. The BoJ has no fixed release time; decisions usually come around midday Tokyo time, roughly 03:00 UTC.
• Watch the vote. Two members opposed the September rise; if a hold comes with members voting for an immediate hike, that points to December.
• Read the Outlook Report's core inflation forecasts. Higher numbers for the coming years would back further rises.
• Remember that the Fed speaks first. A Fed rise on Wednesday would widen the rate gap before the BoJ decides.
• Respect intervention risk. The Ministry of Finance spent more than ¥15 trillion in a single month this summer, and moves of several yen in a day are possible when it acts, so trade smaller and accept that stops may fill at a gap.

Levels and a trade plan are in our daily USD/JPY analysis, which carries Friday's close over the weekend. Our Fed preview covers Wednesday, the week-ahead guide lists every release, and the position size calculator sets your size.

Frequently asked

Sources: Bank of Japan: Change in the Guideline for Money Market Operations, 18 September 2026 · Bank of Japan: Summary of Opinions, 17-18 September 2026 meeting · Ministry of Finance Japan: foreign exchange intervention operations · Bank of Japan: Monetary Policy Meetings schedule · Bank of Japan: Change in the Guideline for Money Market Operations, 16 June 2026 · Statistics Bureau of Japan: Consumer Price Index · US Treasury: daily par yield curve rates