BoJ Keeps Key Interest Rate at 1%, Raises Economic Growth Forecast

The Bank of Japan (BoJ) has maintained its benchmark short-term policy rate at around 1% following a two-day monetary policy meeting. This decision was made by a majority vote of policy members, with Governor Kazuo Ueda and the majority agreeing to freeze the interest rate. The only dissenting member was Hajime Takata, who proposed a 0.25 percentage point rate hike.

The BoJ's key interest rate has been at its highest level in 31 years since September 1995. Analysts had widely anticipated the rate freeze for this month as a foregone conclusion. The market is closely monitoring potential impacts from ongoing instability in the Middle East and Iran, as well as strong earthquake activity in Japan.

The BoJ's 'Outlook for Economic Activity and Prices' report revised its real GDP growth forecast for fiscal 2026 upward to 0.6%, a 0.1 percentage point increase from its April projection of 0.5%. The GDP growth forecast for fiscal 2027 was also raised by 0.1 percentage points to 0.8%.