Bank Of Japan Holds Key Rate As Expected

(RTTNews) - The Bank of Japan left its key interest rate unchanged on Friday after a hike last month as underlying inflation is assessed to be consistent with the 2 percent inflation target.

The policy board, governed by Ueda Kazu, voted 8-1 in favor of holding the interest rate at 1.25 percent, the highest since 1995.

The decision was in line with expectations. The bank had raised the rate by 25 basis points each in June and September. Markets widely anticipate the bank to lift the rate again in December.

The board also decided to increase the pace of exchange-traded fund sales to approximately JPY 860 billion annually, up from the current 330 billion yen per year.

"…underlying CPI inflation is at a level that is generally consistent with the price stability target of 2 percent, and is expected to remain at around that level," the bank said in a statement.

In the latest Outlook for Economic Activity and Prices, real GDP growth projections were more or less unchanged but raised its inflation forecast for the fiscal 2027.

Japan's economy is forecast to continue growing moderately, albeit at a decelerated pace, the bank said.

Real GDP growth outlook for the fiscal 2026 and 2027 were projected at 0.7 percent. While the outlook for the fiscal 2026 was raised marginally from 0.6 percent, the fiscal 2027 forecast was lowered from 0.8 percent.

The growth outlook for the fiscal 2028 was retained at 0.8 percent.

Inflation forecast for the fiscal 2026 was left unchanged at 2.5 percent. Meanwhile, the projected CPI inflation for fiscal 2027 was upgraded to 2.6 percent from 2.4 percent, reflecting factors such as the effects of the rise in crude oil prices since the summer. Inflation is seen at 2.0 percent in the fiscal 2028, unchanged from the prior projection.