Bank of Japan Keeps Rate at 0.5% Amid Global Trade Uncertainty
1min read The Bank of Japan (BOJ) has maintained its policy rate at 0.5% following its latest meeting, a decision that was widely anticipated. The central bank's governor, Kazuo Ueda, emphasized that the BOJ is committed to continuing to raise interest rates if economic and price developments align with their forecasts. This stance is contingent on underlying inflation gradually converging toward the BOJ's 2% target, as projected.
The BOJ's decision comes amidst heightened uncertainty, particularly related to global trade policies and their potential impact on Japan's economy. The central bank acknowledged that the introduction of wide-ranging tariffs could significantly affect global trade activity and create uncertainties that could influence business and household sentiment, as well as global financial and capital markets. These factors could lead to increased import prices and a subsequent decrease in domestic demand, further complicating the economic outlook.
Despite these challenges, the BOJ remains vigilant and is prepared to conduct monetary policy as appropriate to achieve its 2% inflation target sustainably and stably. The central bank's quarterly report highlights the importance of carefully examining developments in economic activity and judging the outlook without preconceptions. The BOJ is also mindful of the potential for disruptions in global logistics and supply chain restructuring, which could further impact import prices and domestic demand.
The BOJ's core consumer price index (CPI) forecasts for the fiscal years 2025, 2026, and 2027 reflect a cautious approach. The median forecast for core CPI in fiscal 2025 is +2.2%, down from +2.4% in January, while the forecast for fiscal 2026 is +1.7%, down from +2.0% in January. The forecast for fiscal 2027 is +1.9%. Similarly, the core-core CPI forecasts for fiscal 2025, 2026, and 2027 are +2.3%, +1.8%, and +2.0%, respectively.
The BOJ's report also notes that Japan's economy is recovering moderately, although some weaknesses are present. Real interest rates remain at significantly low levels, and the central bank is prepared to adjust its monetary policy as needed to support economic growth and achieve its inflation target. The BOJ's commitment to raising interest rates, contingent on economic and price developments, underscores its resolve to navigate the current uncertainties and foster a stable economic environment.
