Bank of Japan Holds Rate at 1% in Split Vote

The Bank of Japan held its benchmark interest rate steady at 1% on Friday, July 31, 2026, in a split decision that highlighted growing internal concern over inflation risks. The central bank's policy board voted 8-1 to maintain the rate, with board member Hajime Takata dissenting in favor of an immediate increase to 1.25%. The decision follows a rate hike in June and signals a continued, cautious approach to policy normalization.

In a statement accompanying the decision, the central bank warned that underlying inflation could rise "clearly above" its 2% target from September onward, a more hawkish assessment than in previous communications. Officials cited wage increases being passed into selling prices, elevated crude oil costs, and yen weakness as persistent inflationary pressures. The bank noted that inflation may later move back toward the 2% target if oil prices decline, but it reiterated a willingness to raise rates further if underlying inflation keeps approaching its goal.

The policy announcement followed a period of intense volatility in the yen. On Thursday night, the Japanese currency spiked sharply from near 162.80 to around 157 per dollar in a move widely...