The Bank of Japan (BOJ) decided to keep its policy rate steady on Friday following the conclusion of its monetary policy meeting, leaving the benchmark policy rate at 0%-0.1%.
This decision aligns with the expectations of economists polled by Reuters. Despite the anticipated outcome, the move follows a lower-than-expected April inflation report, with the core inflation rate recorded at 1.6%, below the Reuters expectations of 2.2%.
The BOJ confirmed its commitment to continue conducting bond purchases in accordance with the March resolution. Previously, the bank had disclosed that it had been purchasing bonds worth approximately six trillion yen ($83.5 billion) monthly.
Meanwhile, there was no specific mention from the BOJ regarding the yen’s performance, which recently breached the 156 level against the U.S. dollar and has been on a weakening trend since the bank terminated its negative interest rate policy last month and eliminated its yield curve control policy.
The central bank also unveiled its second-quarter economic outlook for Japan, revising its inflation forecast for fiscal 2024. The BOJ now anticipates inflation to range between 2.5% and 3% for fiscal 2024, an increase from the 2.2% to 2.5% forecasted in January.
However, the bank expects inflation to moderate to “around 2%” in the subsequent fiscal years of 2025 and 2026, while also revising its GDP growth projections for fiscal 2024 to a range of 0.7% to 1%, lower than the 1%-1.2% growth forecasted in January.
Considering the revised outlook, the BOJ stated that its monetary policy decisions moving forward will be contingent on the evolving economic and price conditions. It emphasized that accommodative financial conditions will be upheld “for the time being.”
The BOJ acknowledged the persistent uncertainties surrounding the domestic and international economic and financial landscapes. However, if the projected forecasts materialize, accompanied by an increase in inflation, the central bank affirmed its readiness to “adjust the degree of monetary accommodation.”
