Bank of Japan Keeps Policy Rate Unchanged for Third Time, Says Current Economic and Inflation Outlook Uncertain

by Park SeungUk

Published 28 Apr.2026 17:34(KST)

Kazuo Ueda, Governor of the Bank of Japan (BOJ), explained the reasoning behind the BOJ's decision to keep the policy rate unchanged for the third consecutive time, stating, "There are significant downside risks to the economy and upside risks to inflation, making it difficult at this point to assess the sustainability or relationship between the two."

Kazuo Ueda, Governor of the Bank of Japan (BOJ), is attending a press conference. Photo by Reuters Yonhap News Agency

At a press conference held on April 28, Governor Ueda said, "I would like to monitor a bit longer to see whether the risks surrounding the economy and inflation will change."

On this day, the Bank of Japan kept its short-term policy rate, which serves as the benchmark interest rate, unchanged at "around 0.75%," in line with market expectations. After raising the short-term policy rate from "around 0.5%" to "around 0.75%" at the Monetary Policy Meeting in December 2025, the BOJ decided to keep it unchanged for three consecutive times, including in January, March, and now again.

This decision appears to be based on the view that it is difficult to precisely gauge the impact of the tense situation in the Middle East and high oil prices on the Japanese economy. Last month, Governor Ueda commented at a press conference that "if the impact of the Middle East situation is temporary, a rate hike is possible," which briefly fueled expectations for an additional policy rate increase. However, as negotiations between the United States and Iran have stalled, expectations for a rate hold have become dominant.

Governor Ueda indicated the possibility of a future rate hike, saying, "Considering that the real interest rate remains at a very low level, the degree of monetary easing will be adjusted by raising the policy rate depending on the economy, inflation, and financial conditions."

In its "Outlook for Economic Activity and Prices" report released on the same day, the Bank of Japan raised its inflation forecast due to instability in the Middle East. The forecast for Japan's consumer price inflation rate, excluding fresh food, for this year was raised to 2.8% from 1.9% in January. The inflation forecast for next year was also increased from 2.0% to 2.3%.

Economic growth was forecast at a lower rate than previously expected. Next year's growth rate was slightly lowered from 0.8% to 0.7%, and the growth rate for 2028 was forecast at 0.8%.