BOJ Keeps Rates Steady Amid Volatility and Revisions to Inflation Forecasts

The USD/JPY pair saw significant volatility on Friday after suspected intervention by Japanese authorities. Although there's no official confirmation, investors believe the Bank of Japan supported the yen following a sharp drop the previous day.

The Bank of Japan held its policy meeting and kept interest rates unchanged at 1.0%, as widely expected. However, board member Hajime Takata dissented, advocating for further rate increases due to accelerating inflation risks linked to the Middle East conflict.

The BOJ revised its inflation and growth forecasts in its quarterly outlook. It lowered core inflation expectations for fiscal year 2026 to 2.5% from 2.8%, attributing the revision to a gradual weakening of oil price impacts. Meanwhile, it slightly raised GDP growth forecast for the same period to 0.6% from 0.5%, driven by robust domestic demand and government measures aimed at reducing household energy spending.