Japan Inflation Rises, BOJ Considers December Rate Hike Amid Economic Uncertainties

Japan's Bank of Japan (BOJ) is poised to debate the timing of its next interest rate hike amid persistent inflation and economic uncertainties. Although inflation edged up to 2.9% in September, matching forecasts, the BOJ is expected to hold rates steady at 0.5% during its October meeting, influenced by political factors such as Prime Minister Sanae Takaichi's call for coordination between the government and BOJ on wage-driven inflation. Some BOJ board members advocate for a rate increase to 0.75%, citing sustained inflation and wage gains, but the majority remain cautious given trade tensions and slowing growth momentum, particularly in manufacturing. Former BOJ executive Eiji Maeda projects a likely rate hike in December, supported by expected fiscal stimulus under the new administration and moderate economic expansion despite U.S. tariffs. Market watchers anticipate further rate increases to 1% by next summer, with the BOJ closely monitoring upcoming economic data including wage plans and business surveys. Overall, the central bank appears to balance inflation risks with economic uncertainties and political considerations as it plans its monetary policy path.