Bank of Japan Holds Interest Rate, Downgrades Growth Outlook

The Bank of Japan kept its key interest rate steady at 0.5 percent, citing heightened global economic uncertainty and the impact of US-led trade tariffs for its decision. The central bank lowered its economic growth projections for fiscal years 2025 and 2026, now anticipating growth of 0.5 percent and 0.7 percent, respectively, with a modest recovery to 1.0 percent in 2027. Inflation forecasts were also revised downward, with core inflation now expected at 2.2 percent for 2025 and 1.7 percent for 2026, reflecting both slowing economic activity and lower crude oil prices. Bank Governor Kazuo Ueda emphasized that persistent trade tensions and the risk of further tariffs are key concerns, leading to caution about future rate hikes. While the BOJ maintains that inflation is broadly on track to meet its 2 percent target, it acknowledges that risks to both growth and prices are now tilted to the downside for the next two years. The bank’s cautious stance contrasts with speculation about possible rate cuts in the US and Europe as global growth prospects dim.