BOJ holds rates at 1%, warns of core inflation exceeding 2% target

The Bank of Japan held its policy rate at 1% on Friday in an 8-1 decision, while warning that core inflation could breach its 2% target. The move keeps borrowing costs steady amid market debate over the pace of future rate hikes.

Japan's central bank maintained its current stance despite persistent inflation pressures. The near-unanimous vote—only one board member dissented—signals broad consensus on holding steady for now, even as the inflation outlook tilts higher.

The decision arrives as traders parse signals on the BOJ's tightening trajectory. With the policy rate anchored at 1% and core inflation guidance pointing above the 2% threshold, the spread between Japan's rates and those of peers like the Federal Reserve remains a key driver for yen positioning. The BOJ's cautious tone contrasts with the upward inflation revision, creating uncertainty around the timing of the next move.