The Bank of Japan (BOJ) kept its policy interest rate unchanged at around 0.25 percent, updating its growth and price outlook. The central bank now expects Japan’s core consumer inflation, excluding fresh foods, to reach 2.5 percent for the current fiscal year ending March, unchanged from the earlier projection. However, it lowered the projected inflation rate for fiscal 2025 from 2.1 percent to 1.9 percent, below the bank’s price stability goal of 2 percent.
U.S. economic risks ease
“Looking at domestic data, wages and prices are moving in line with our forecasts. As for downside risks to the U.S. and overseas economies, we’re seeing clouds clear a bit,” governor Kazuo Ueda told a news conference. The governor’s remarks were less dovish than those made before Thursday’s meeting, noting that the Bank of Japan can “afford to spend time” scrutinizing the fallout from risks such as U.S. economic uncertainties and volatile financial markets.
“As for the timing of the next rate hike, we have no preset idea. We will scrutinize data available at the time of each policy meeting, and update our view on the economy and outlook, in deciding policy,” Ueda added.
As expected, the Bank of Japan kept short-term interest rates at 0.25 percent at its two-day meeting, its first since an inconclusive general election that analysts say will complicate efforts to normalize interest rates after years of ultra-easy policy.
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BOJ to meet next on December 18-19
The Bank of Japan’s next policy meeting is on December 18-19, followed by another meeting on January 23-24.
In its quarterly outlook report, the central bank said that it expects underlying inflation to converge around 2 percent sometime around late 2025 or beyond as service prices continue to rise moderately. The board cut its core consumer inflation forecast for fiscal 2025 to 1.9 percent but said risks were skewed to the upside for that year. It kept its fiscal 2026 core inflation forecast unchanged at 1.9 percent.
The Bank of Japan ended negative rates in March and raised short-term interest rates to 0.25 percent in July in a bid to progress Japan towards sustainably achieving its 2 percent inflation target. Ueda has repeatedly said that the central bank will keep raising rates if the economy moves in line with its forecast.
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