FX.co ★ BoJ Keeps Monetary Policy Unchanged

On Friday, the Bank of Japan maintained its primary interest rate while increasing its forecast for inflation. The decision to keep the uncollateralized overnight call rate between 0 to 0.1 percent was unanimously agreed upon by the policy board.

The board also resolved to continue its bond purchase initiative in accordance with the decisions taken during a meeting in March. In the bank's report on Economic Activity and Price Outlook, it suggested inflation is predicted to increase until the fiscal year of 2025. This prediction is spurred on by rising crude oil prices and the diminishing effects of the government's economic interventions.

The bank went on to improve its inflation projection for fiscal 2024 from 2.4 percent to 2.8 percent. Likewise, the forecast for fiscal 2025 was increased from 1.8 percent to 1.9 percent. The bank anticipates an inflation rate of 1.9 percent in fiscal 2026.

Simultaneously, the bank adjusted its growth forecast for fiscal 2024, lowering it from 1.2 percent to 0.8 percent. It is predicted that the economy will grow by 1.0 percent during both fiscal 2025 and 2026. The forecast for fiscal 2025 was therefore kept consistent with the previous projection.