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yesterday

BOJ Holds Policy Rate at 0.5% as Government Lowers 2025 Growth Forecast

Summary of Opinions exposed divisions over the timing of rate hikes with swap rates showing a better than 50 percent chance of an increase by year-end

A passerby walks past in front of the Bank of Japan headquarters in Tokyo, Japan, January 23, 2025. REUTERS/Issei Kato/File Photo
A store staff member tries to attract customers outside a store in Tokyo, Japan, May 15, 2025. REUTERS/Issei Kato/ File Photo
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Pedestrians walk past an electronic board displaying various companies' share prices, at a business district in Tokyo, Japan, October 31, 2023. REUTERS/Kim Kyung-Hoon/ File Photo

Overview

  • At its July 30–31 meeting the BOJ kept its policy rate at 0.5%, raised inflation forecasts and offered a more optimistic economic outlook than three months earlier.
  • The Summary of Opinions revealed splits among board members, with some urging immediate rate hikes to counter inflation and others calling for patience amid uncertainty over U.S. tariffs.
  • Japan’s government cut its fiscal 2025 GDP growth forecast to 0.7% from 1.2%, citing tariff pressures on capital spending and persistent inflation weighing on household consumption.
  • Board members noted that inflation has exceeded the BOJ’s 2% target for over three years and warned that rising food and fuel costs could further damp consumer spending.
  • A Reuters poll indicated swap rates imply a 54% chance of a BOJ rate increase in October and a 71% chance by December, reflecting growing market bets on year-end tightening.