BOJ Keeps Benchmark Rate at 1%... Raises Growth Forecast

GDP Growth Forecast Raised to 0.6% for This Year

Reuters Yonhap News

The Bank of Japan (BOJ), Japan's central bank, has kept its key short-term policy interest rate unchanged at 1%.

On July 31, the BOJ announced at its monetary policy meeting that it would maintain the policy rate at 1%. This decision was in line with the expectations of all 52 economists surveyed by Bloomberg. Out of the nine Monetary Policy Board members, eight voted in favor of keeping the rate unchanged. Policy Board member Hajime Takata suggested raising the rate to 1.25%, citing inflation risks arising from overseas-led economic expansion, but the proposal was rejected by the majority.

At the previous meeting last month, the BOJ had raised its policy rate by 0.25 percentage points from 0.75% to 1% amid instability in the Middle East and mounting inflationary pressures.

On this day, the BOJ also released its quarterly economic outlook report, the “Outlook for Economic Activity and Prices.” The median forecast for real GDP growth for fiscal year 2026 among policy board members was set at 0.6%, 0.1 percentage points higher than in April. The forecast for next year was also raised by 0.1 percentage points to 0.8%. The BOJ assessed that robust global demand for artificial intelligence (AI) and government stimulus measures would support the economy.

The core Consumer Price Index (CPI) inflation rate for this year, excluding fresh food, was projected at 2.5%, down 0.3 percentage points from April. This reflects the dampening effect on prices from the government’s extension of subsidies for electricity and gas bills. For next year, when the impact of subsidies is expected to dissipate, the forecast was raised by 0.1 percentage points to 2.4%.

This content was produced with the assistance of AI translation services.