Bank of Japan Holds Benchmark Rate Steady for Third Consecutive Meeting, Keeps It at 0.75%

The Bank of Japan (BOJ) decided on April 28 to keep its benchmark interest rate at "around 0.75%," marking the third consecutive meeting where the rate has been held steady.

According to the Nihon Keizai Shimbun (Nikkei) and other sources, the Bank of Japan decided at its monetary policy meeting, which began the previous day, to maintain the short-term policy interest rate at the existing level of "around 0.75%."

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The Bank of Japan has kept the short-term policy rate unchanged for three consecutive meetings since raising it by 0.25 percentage points in December of last year, continuing through January, March, and now this month.

At the monetary policy meeting, three of the nine policy board members opposed the rate freeze, citing risks such as rising inflation. These members proposed raising the rate to 1.0%, but the majority voted against the proposal, resulting in its rejection.

At this meeting, the Bank of Japan also released its quarterly "Outlook for Economic Activity and Prices" report. Reflecting instability in the Middle East and other factors, the BOJ raised its inflation forecast while lowering its economic growth projection compared to the previous outlook.

The median forecast for this year’s consumer price index (CPI) growth, excluding fresh food, was set at 2.8%, an increase of 0.9 percentage points from the January forecast. Next year’s projection was raised by 0.3 percentage points to 2.3%. For 2028, the BOJ presented its first-ever inflation forecast at 2.0%.

The Bank of Japan stated, "This year, rising oil prices will act as inflationary pressure centered on commodity prices," but added, "This effect is expected to gradually weaken over time."

The GDP growth forecasts for both this year and next were revised downward. The projection for this year was lowered by 0.5 percentage points to 0.5%, and for next year, it was reduced by 0.1 percentage points to 0.7%. The outlook for 2028 is 0.8%.

In its report, the Bank of Japan mentioned that persistently high oil prices could pose further risks of economic slowdown, stating, "The risks to the inflation outlook are tilted to the upside." The report also emphasized, "It is important to remain vigilant so that the risk of a significant surge in inflation does not materialize."

The BOJ also noted that companies are actively pursuing wage and price increases, analyzing that "the environment may be increasingly conducive to raising the underlying inflation rate." The Bank of Japan maintained its existing view that the 2% inflation target could be achieved from the latter half of this year through the whole of next year.

The central bank retained its previous assessment that the real interest rate, which reflects inflation, "remains at a very low level." It added, "Depending on economic, price, and financial conditions, we will continue to raise the policy rate going forward."

The Nikkei interpreted this as suggesting that the BOJ may prioritize inflation risks over downside economic risks in the future, indicating a possibility of raising rates.

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