BOJ Keeps Rates Unchanged Amid Weak Yen Pressure

The Bank of Japan (BOJ) maintained its key interest rate at 1% on Friday, as expected by most economists. The decision came after a two-day policy meeting, where the central bank voted 8-1 to keep the short-term policy rate unchanged. Board member Hajime Takata was the sole dissenter, proposing a 25-basis-point increase to 1.25%, highlighting ongoing debate within the policy board over the pace of monetary tightening.

The BOJ's decision follows Japan's government intervention in currency markets by buying yen and selling dollars to arrest the currency's slide from four-decade lows. This move underscores concerns over the impact of a weak yen on import costs and inflation, with most economists surveyed by Reuters expecting another rate hike to 1.25% before the end of the year.

The BOJ upgraded its economic growth forecast for fiscal 2026 in its quarterly outlook report, reflecting easing concerns over the impact of the Middle East conflict on Japan's economy. However, it lowered its near-term inflation projections due to government subsidies and lower oil prices compared with earlier assumptions.