Bank of Japan keeps policy rate steady while raising inflation forecast on Iran war worries
The decision to keep rates steady came in a split 6-3 vote, and was in line with Reuters-polled analysts' estimates.
AbJimroe
The yen rose on Monday, helped by comments from Bank of Japan Governor Kazuo Ueda who left the door open to a near-term rate hike.
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Japan's central bank kept its policy rate steady at 0.75% on Tuesday, while revising its inflation estimates upwards as the Iran war raises supply-side risks.
The decision to keep rates steady came in a split 6-3 vote, and was in line with Reuters-polled analysts' estimates.
The BOJ also cuts its growth forecasts for the fiscal year 2026 to 0.5% from 1%, and sharply raised its core inflation forecasts to 2.8% from 1.9%
Inflation in Japan accelerated for the first time in five months, rising to 1.8% in March as the Iran war fuels worries around energy prices.
Headline inflation came in at 1.5%, compared with 1.3% in February, staying below the central bank's 2% target for a second straight month.
The so-called "core-core" inflation rate, which strips out prices of both fresh food and energy, dipped to 2.4% from February's 2.5%, marking its lowest level since October 2024.
Japan had narrowly avoided a technical recession in the last quarter of 2025, with the country's economy growing at a revised 0.3% quarter on quarter and 1.3% year-on-year.
The BOJ's decision comes as government bond yields rise to multi-decade highs. The benchmark 10-year Japanese government bond yield hit 2.496% on April 13 — the highest since 1997.
A Bank of Japan survey released last week also showed that more than 83% of the respondents expect prices to be higher after one year.
Japan has scrapped taxes on gasoline and introduced subsidies to try to cushion the impact of rising oil prices.
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