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INSTANT VIEW-Analysts react to BOJ decision to keep rates steady

By Reuters News

Oct 30 (Reuters) - The Bank of Japan kept interest rates steady on Friday, but revised up its inflation forecast and stressed anew its readiness to continue pushing up borrowing costs to forestall mounting inflation risks.

The central bank decided to maintain its short-term policy target at 1.25% by an 8-1 vote. Board member Hajime Takata dissented to the decision, instead calling for a 1.5% hike.

Governor Kazuo Ueda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

COMMENTS

MASAHIKO LOO, CHIEF FIXED INCOME STRATEGIST, STATE STREET INVESTMENT MANAGEMENT, TOKYO:

"A boring hold, but an important shift in the Outlook Report. The BOJ's recognition that underlying inflation is now around 2% brings its assessment closer to the reality that conventional inflation measures have already been around or above target for much of the past four years.

"Taking its cue from the Fed and ECB, the BOJ has little reason to rush, particularly with US midterm elections potentially adding volatility across currencies and bonds. Ueda can stay data-dependent, keep every meeting live and preserve the next hike for around the turn of the year.

"Bottom line: boring hold, hawkish direction. The debate is no longer whether the BOJ normalises, but where terminal lands. Our base case remains around 1.75% as Japan joins the synchronised global tightening cycle."

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