The Bank of Japan (BOJ) left interest rates unchanged on Thursday in a nearly unanimous decision, reflecting caution over Japan’s economic outlook and inflation trajectory.
The BOJ maintained its short-term policy rate at 0.25%, aligning with expectations from a Reuters poll. Eight of the nine board members supported the decision, with Naoki Tamura dissenting and advocating for a 25-basis-point increase due to concerns about rising inflation.
BOJ Governor Kazuo Ueda is scheduled to hold a press conference at 01:30 ET (06:30 GMT).
The central bank projected that consumer price index inflation would accelerate in 2025, supported by a virtuous cycle of higher wages and increased private consumption. The impact of recent government subsidies aimed at reducing living costs is also expected to diminish next year.
Market sentiment was divided over Thursday’s decision, with some analysts anticipating a 25-basis-point hike in light of recent inflationary pressures. However, Japan’s economic activity has slowed this year, as robust private consumption has been offset by weaker business investment.
Political uncertainties in Japan likely influenced the decision to hold rates steady, with the BOJ potentially facing resistance from the government against further rate hikes.
Thursday’s decision follows two rate increases by the BOJ in 2024, which marked the end of nearly a decade of ultra-loose monetary policy. These hikes were primarily driven by substantial wage increases secured by Japanese labor unions—a trend expected to repeat in 2025.Analysts predicting a rate hold in December believe the central bank is likely to raise rates in the coming months, potentially as early as January or March. The spring wage negotiations will be a critical factor for the central bank’s decision-making.
