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Bank of Japan Holds Rates Steady at 0.5% While Cutting Growth Forecasts

The central bank maintains its inflation target of 2% despite economic uncertainties from U.S. tariffs and trade tensions.

A passerby walks past in front of the Bank of Japan headquarters in Tokyo, Japan January 23, 2025. REUTERS/Issei Kato
People walk in front of the Bank of Japan building in Tokyo, Japan January 23, 2024. REUTERS/Kim Kyung-Hoon
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Overview

  • The Bank of Japan concluded its two-day policy meeting by keeping its short-term interest rate unchanged at 0.5%.
  • Growth forecasts for the Japanese economy were reduced, reflecting the impact of U.S. tariffs and global trade uncertainties.
  • Inflation is still projected to meet the BOJ's 2% target in the coming years, supporting the bank's gradual policy normalization strategy.
  • Governor Kazuo Ueda reaffirmed the BOJ's readiness to raise rates further if inflation sustainably aligns with the 2% goal.
  • Market watchers are closely monitoring the BOJ's stance on yen stability, as a weaker currency could exacerbate inflation and attract scrutiny from the U.S.