The Bank of Japan is preparing to make a small increase to its inflation forecasts for the fiscal year 2027 while leaving borrowing costs unchanged, according to people familiar with the discussions.
The central bank is expected to keep its key interest rate at 1.25% when policymakers meet in late October. The decision on prices would come as part of the bank’s regular update of its economic projections, which is released alongside the rate announcement.
The upgrade to the 2027 forecast is expected to be modest. It would reflect a view that price pressures could prove a little stronger than previously thought over the medium term. It would not signal a dramatic change in the bank’s thinking.
Officials are aware that inflation could turn out higher than expected. Even so, the sources say there is no pressing need to raise rates again right away. The bank appears comfortable taking time to see how conditions develop before making its next move.
One reason for that patience is the latest economic data. Recent figures suggest that inflation is not building up quickly. Prices are still rising, but the pace does not point to a sudden surge that would force the bank to act. That gives policymakers room to wait and gather more evidence.
A hold would fit the cautious approach the central bank has taken as it moves away from years of extremely low interest rates. Rather than rushing, officials have tended to move in small steps and check how households, businesses and financial markets respond.
Investors will now focus on the wording of the bank’s statement and on any comments from its leadership after the meeting. They will look for hints about when the next increase might come and how fast the bank intends to go. For now, the signs point to a quiet October meeting with only a minor change to the forecasts.