The Bank of Japan left its key interest rate unchanged Wednesday in a widely expected move given the global economic uncertainty fueled by U.S. trade tariffs.
Following a two-day policy meeting, the central bank said it was keeping its key interest rate at around 0.5 percent.
"There remain high uncertainties surrounding Japan's economic activity and prices, including the evolving situation regarding trade," a BOJ statement said.
The bank hiked rates in January to their highest level in 17 years on the back of bumper inflation in the world's fourth largest economy.
Since then, U.S. President Donald Trump has imposed levies on multiple trading partners and imports including steel.
"I am worried about uncertainty regarding overseas economic and price trends," BOJ Governor Kazuo Ueda told a parliament session last week when asked what concerned him the most.
"With the dust still settling from January's rate hike... the BOJ will want to gauge the impact of recent monetary policy changes on the economy before making its next move," Stefan Angrick of Moody's Analytics wrote in a note ahead of the policy decision.
"At the same time, a wave of tariff measures and threats from Washington have kept financial markets on edge, adding to the reasons for the BOJ to stand pat," he said.
SPI Asset Management's Stephen Innes said the Federal Reserve and Bank of England were also expected to hold rates this week "as policymakers take their first collective pulse check on the fallout from Trump's trade policies".
The BOJ is gradually normalizing its policies following years of aggressive monetary easing to try to jump-start the stagnant economy.
But headline inflation has been above the bank's two-percent target every month since April 2022, and a year ago it finally lifted its interest rates above zero, before increasing them to 0.25 percent in July.
Ueda said after the January decision that the pace and timing of future increases would be decided after studying "the impact of this rate hike".
Wage trends are also key, after trade unions said early data showed they had secured an average 5.5 percent pay rise for members this year, a three-decade high and up from last year's preliminary reading of 5.3 percent.
The bank said on Wednesday that in Japan, "the employment and income situation has improved moderately".
"If the annual spring labour negotiations lead to significantly higher wages then we believe there is a possibility for an interest rate hike in the summer and another one six months later," Katsutoshi Inadome of SuMi TRUST said.
© 2025 AFP
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HopeSpringsEternal
BOJ really in a tough spot, as inflation is 'ROARING' in Japan, we all commonly see +20% price increases as the new normal when buying groceries or other goods.
Raising rates will act to strengthen yen and thus help on the "imported" inflation front, but Japan's accumulated debt becoming harder to service, as 40year JGB's passed 3% for FIRST time in history = Classic Debt Trap
HopeSpringsEternal
Japan exported millions of cars to US in 2024 and much of this activity will have to shift to the US shortly in order for automakers to protect their market share. Even worse are Japan's automakers investments in Canada and Mexico, subject to high tariffs as well.
Given above serious disruption even if well telegraphed, BOJ must be VERY worried about Japan's labor market, given Auto is largest sector for employment.