The Bank of Japan (BOJ) has maintained its short-term benchmark interest rate at 0.25% during its latest monetary policy meeting, reflecting caution over Japan’s economic outlook and inflation trends. The decision was nearly unanimous, with eight out of nine policymakers voting in favor, while Naoki Tamura stood alone in advocating for a 25 basis-point hike.
Key Highlights

Inflation Outlook: The BOJ forecasts consumer price index (CPI) inflation to accelerate in 2025, supported by higher wages and increased private consumption. Government subsidies designed to lower living costs are expected to phase out, potentially boosting inflation in the coming year.

Economic Activity: Despite strong private consumption, Japan’s economic activity has softened due to reduced business spending. This balanced growth outlook prompted the BOJ to pause further rate hikes.

Political Considerations: The decision to hold rates also reflects political uncertainty and anticipated resistance from the government against additional rate increases.

Historical Context
The BOJ’s policy marks a continuation of its cautious stance following two rate hikes in 2024, which ended nearly a decade of ultra-loose monetary policy. These adjustments were largely driven by significant wage increases negotiated by Japanese labor unions—a trend expected to recur in 2025.
BOJ Governor Kazuo Ueda is set to address the decision and share further insights into the bank’s policy trajectory later today.
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