The Bank of Japan has kept borrowing costs on hold while making clear that further rises remain firmly on the table, as inflation in the world’s fourth-largest economy continues to run hot.

At a two-day meeting ending on Friday, the central bank maintained its short-term policy target at 1.25% by an 8–1 vote. Board member Hajime Takata dissented, arguing instead for an increase to 1.5%. Governor Kazuo Ueda was due to explain the decision at a news conference at 3:30 p.m. (0630 GMT).

Inflation outlook raised

Alongside the hold, the bank revised up its inflation forecast and stressed anew its readiness to keep pushing borrowing costs higher to head off mounting price risks. Annual core inflation in Tokyo, the capital, well exceeded the bank’s 2% target in October, according to data released on Friday, underlining the pressure policymakers face.

Analysts noted a significant shift in the bank’s language: it now judges that underlying inflation, stripping out temporary factors, has reached its 2% target and is likely to stay around that level. That assessment brings the bank closer to the reality that conventional inflation measures have already sat at or above target for much of the past four years.

Markets look to December

The decision itself caused little immediate drama in currency or bond markets, with the hold widely expected. Attention now turns to whether the bank moves again in December or waits until January. The bank also announced a revision to the pace at which it sells the exchange-traded funds it bought during years of market support, with Nikkei futures slipping after that part of the announcement. For households and businesses, the message is that Japan’s long era of ultra-cheap money is continuing to unwind, even if this meeting kept rates steady.

Sources: Reuters; Reuters.