Bank of Japan Declares Its 2% Inflation Target Reached and More Than Doubles Planned Stock-Fund Sales

The Bank of Japan said on Friday that underlying inflation is now generally consistent with its 2% price-stability target, the first such judgment since the target was set in 2013.

The judgment came in the bank's quarterly Outlook Report. It was published after the Oct. 29-30 policy meeting in Tokyo.

By an 8-1 vote, the board kept its short-term policy rate at around 1.25%. Board member Hajime Takata dissented, proposing a rise to around 1.5%.

Takata argued that underlying inflation had already reached the target. In his view, the bank should move faster toward a neutral rate, one that neither stimulates nor restrains the economy.

The target, in the bank's own terms

Underlying inflation strips out temporary price swings. It is the trend measure the bank watches against its 2% target.

The Outlook Report said that trend is now at the target level. It is expected to remain at around that level, the bank said.

Two supports sit underneath the judgment. A strong sense of labor shortage keeps wages and prices rising in interaction, the report said.

Medium- to long-term inflation expectations are at around 2%. The bank introduced the 2% target in January 2013, under its price-stability framework.

Forecasts were raised, and they are projections

These figures are the board's projections, not reported outcomes. Core prices mean the consumer price index excluding fresh food.

For fiscal 2027, the year ending in March 2028, the median core inflation forecast rose to 2.6%. The July forecast was 2.4%.

The fiscal 2026 forecast stayed at 2.5%, and fiscal 2028 stayed at 2.0%. A narrower core measure, excluding fresh food and energy, was forecast at 2.7% for fiscal 2027.

Growth projections barely moved. Real output was forecast to grow 0.7% in fiscal 2026 and fiscal 2027, then 0.8% in fiscal 2028.

The bank traced the higher price path to crude oil, semiconductor prices, and the weaker yen. It also judged price risks skewed to the upside.

One caveat matters for later comparisons. The forecasts exclude a proposed cut to the consumption tax on food and beverages, still being debated.

More hikes are the stated direction

The Outlook Report's guidance was explicit. With underlying inflation at the target and financial conditions accommodative, the bank will keep raising its policy rate.

It said it would weigh timing and pace against the outlook and its risks. Stabilizing underlying inflation around 2% is now the stated priority.

Governor Kazuo Ueda sounded the same note at his press conference. Underlying inflation has reached levels consistent with the target, he said.

"We must therefore be vigilant to the risk of inflation overshooting our target," Ueda said, in remarks translated by Reuters.

He also set a limit on the declaration. "Our goal is to sustainably and stably achieve our price target. In that sense, we haven't reached our goal yet," he said.

Reuters read the message as opening the door to a hike as soon as December. It described a phase open to raising rates once every few months.

Before the decision, markets had priced about an 80% chance of a December hike, Reuters reported. That pricing was set before Friday's documents landed.

Stock-fund sales more than double

Separately, and unanimously, the board accelerated sales of its exchange-traded funds. These are pooled funds that hold baskets of stocks, bought heavily during the stimulus years.

From January 2027, planned sales rise to about 860 billion yen a year at book value. The current pace is about 330 billion yen a year.

At market value, the new pace is about 2.46 trillion yen a year. It equals about 0.10% of market trading value, up from about 0.05%.

Even at the faster pace, the exit remains slow. The bank's own reference puts completion at about 43 years, down from about 112 years.

Sales since January 2026 have run smoothly without a major market impact, the bank said. It kept the right to adjust or suspend sales if market conditions change.

Sales of Japanese real estate investment trusts stay unchanged. That pace remains about 5 billion yen a year at book value.

Analysts heard a hawkish hold

"A boring hold, but an important shift in the Outlook Report," said Masahiko Loo of State Street Investment Management, in comments gathered by Reuters.

His base case puts the eventual policy rate around 1.75%. The debate, he said, is no longer whether the bank normalizes, but where the terminal rate lands.

Hirofumi Suzuki of SMBC said the faster stock-fund exit would still take about 43 years. On his reading, its market impact is likely to be limited.

What remains unknown

What remains unknown is whether December brings the next hike. Ueda tied timing to data, expectations, and financial conditions, not to a calendar promise.

Also unknown is whether underlying inflation stays anchored at 2%. The bank's own risk case has expectations rising and the trend overshooting the target.

What to watch is the December policy meeting and the data that lands before it. January then tests whether faster stock-fund sales pass through markets as smoothly as the first year did.