Bank of Japan Keeps Interest Rates Unchanged

The Bank of Japan (BOJ) decided to keep interest rates unchanged in its latest meeting. With this decision, the central bank stated that it would continue to examine the lasting effects of wage increases on economic expansion and inflation, maintaining the rate with an 8-1 vote, with the sole dissent coming from Naoki Tamura. BOJ Governor Kazuo Ueda is expected to provide comments on the review of policies aimed at terminating stimulus measures during the press conference scheduled for 09:30 JST.

The BOJ published findings on the benefits and costs of various unconventional monetary easing tools used during its 25-year battle against deflation. This step has gained importance as a symbolic move towards the process of ending stimulative measures. It was noted that the policy review was initiated when Ueda took office in April of last year.

Economic outlook and monetary policy assessments The BOJ pointed out that Japan’s economic and price outlook still contains significant uncertainties. Additionally, the effects of exchange rate volatility on inflation may be greater compared to the past due to changes in companies' wage and price-setting behaviors. This situation underscores the necessity to monitor the impacts of exchange rates and market movements on Japan's economy and prices carefully.

The BOJ expressed that the Japanese economy is recovering moderately, albeit with some weaknesses, and stated that inflation expectations are rising moderately. It is projected that during the second half of the BOJ's projection period, which covers the three-year period up to the fiscal year 2026, inflation will generally reach a level consistent with the BOJ's price target. A moderate increasing trend is also observed in private consumption. While the market's expectation for interest rates is at 0.50%, the current rate remains maintained at 0.25%.