BOJ Signals Readiness for Further Rate Hikes Amid Inflation Risks

The Bank of Japan (BOJ) kept interest rates steady at 1% on Friday but signaled its readiness to tighten further in response to inflationary risks. This move comes after a hike to the 31-year-high level last month and as the government props up the yen through market intervention.

BOJ Governor Kazuo Ueda warned that underlying inflation could exceed the central bank's 2% target, which would warrant higher rates. He stated that the BOJ must scrutinize upside price risks and debate its policy from the next meeting onward with this point in mind.

The BOJ also highlighted inflationary pressures from robust global AI-demand and said concern over the economic hit from the Middle East conflict was receding. The central bank revised down its core inflation forecast for the current fiscal year to 2.5% but revised up its forecast for fiscal 2027.