Bank of Japan Holds Interest Rates Steady

Investing.com– The Bank of Japan (BOJ) kept interest rates unchanged in a nearly unanimous decision on Thursday, remaining cautious about Japan’s economic outlook and inflation path.

The BOJ maintained its benchmark short-term policy rate at 0.25%, aligning with a Reuters poll. Eight of the nine rate-setting board members supported the decision, with only BOJ member Naoki Tamura dissenting, advocating for a 25 basis point increase due to rising inflation concerns.

BOJ Governor Kazuo Ueda is scheduled to speak at 01:30 ET (06:30 GMT).

The BOJ projects that consumer price index inflation will rise in 2025, benefiting from a virtuous cycle of higher wages and increased private consumption. However, the effects of recent government subsidies to lower living costs are anticipated to diminish in the upcoming year.

Market reactions were mixed following the decision, with some analysts predicting a 25 basis point hike due to recent signs of inflation, although economic activity in Japan has weakened this year, as strong private consumption has been offset by declining business spending.

Increased political uncertainty in Japan may have influenced Thursday’s decision, especially considering potential government resistance to further rate hikes.

This decision comes after the BOJ hiked rates twice in 2024, marking the end of nearly a decade of ultra-loose monetary policy, primarily driven by Japanese labor unions negotiating significant wage increases—an expectation to continue in 2025.

Analysts predicting a hold in December believe the central bank may still raise rates in the coming months, possibly as soon as January or March, with spring wage negotiations being a critical focus for the central bank.