BOJ declares inflation victory but still won't budge on rates, so what's the hold-up?

If you think back to a decade ago, the BOJ being able to even see the path to reach the inflation target was very much a pipedream. Yet, here we are today. The central bank finally gets to declare victory on inflation. That must mean champagne all around, surely? Well, not quite.As it would seem, getting to the finish line and convincing policymakers to do something about it are two very different things.The BOJ kept its policy rate unchanged today at 1.25% in a 8-1 vote, with board member Takata dissenting in playing the role as the lone hawk again. He called for a 25 bps rate hike to 1.50% but the rest of the board wasn't having any of it. So, what's the story here?The most interesting bit of the meeting decision today is that the BOJ now says that underlying inflation has reached a level broadly consistent with its 2% target. Policymakers also expect inflation to remain around there as we move forward. So, that is quite a milestone after more than a decade of trying to get inflation sustainably back on track.Adding to that, the central bank also raised its core inflation forecast for fiscal year 2027 to 2.6% from 2.4% previously.So if inflation is already where policymakers want it to be, what's stopping them from moving faster?As it turns out, the overwhelming majority of the board clearly still prefers a more measured approach. Having just raised interest rates in September, there's little appetite to rush another move while assessing how previous tightening is feeding through to the economy. How typical of the BOJ, eh?But in the bigger picture, I would argue that there is the political headache to consider.Japan prime minister Takaichi's two board appointees, namely Asada and Sato, already voted against the rate hike in September. And that will serve as a reminder that getting further tightening through the board might not be quite so straightforward, even though the central bank has already declared victory on inflation.Looking to next year, things could get even trickier and more challenging for the BOJ. Takaichi will have the opportunity to nominate replacements for two more board members in 2027. And if those appointments lean similarly dovish (which they likely will *coughs*), Ueda could find himself facing a more divided committee.Even with today's signal, traders are pricing roughly 57% odds of another 25 bps rate hike in December. That is hardly a convincing endorsement of the next move, let alone any real confidence in the BOJ stepping up their tightening pace next year.As for Ueda's press conference later, I would expect him to reiterate that further tightening remains on the table while keeping the timing deliberately vague. That'd be very on-brand of him. If anything, just watch for whether he puts more emphasis on the inflation milestone or the need to assess growth, wages and financial conditions.But unless he offers something more definitive, I suspect markets will be left with much the same question heading into December.After such a long battle, the BOJ has finally managed to tick the inflation box. However, now comes the harder part of getting everyone on board with what happens next. This article was written by Justin Low at investinglive.com.