BOJ Expected to Hold Key Interest Rate Next Week...Growth Forecast Likely to Be Raised

Interest Rate Raised by 0.25 Percentage Points Last Month
Decision Expected After Assessing Impact on Businesses and Households
Financial Markets Predict Possible Rate Hike in April

The Bank of Japan (BOJ), Japan’s central bank, is expected to keep its benchmark interest rate unchanged at the monetary policy meeting scheduled for next week.

According to the Nikkei on January 17, the Bank of Japan will hold its first monetary policy meeting of the year on January 22-23. Given that the central bank raised the rate by 0.25 percentage points to "around 0.75%" at last month's meeting, it is likely to leave the rate unchanged this time.

Since Japan’s current interest rate is at its highest level in over 30 years, the central bank is expected to carefully monitor the impact of rate hikes on businesses and households. The benchmark interest rate in Japan has been trapped at what is known as the "0.5% barrier" for 30 years, after being lowered from 1.0% to 0.5% in September 1995.

However, some within the Bank of Japan reportedly believe that an early rate hike is necessary, considering the continued weakness of the yen. Financial markets are forecasting that the Bank of Japan could raise rates as early as April.

In addition, it is expected that the Bank of Japan will raise its real gross domestic product (GDP) forecast in the "Outlook for Economic Activity and Prices" report to be released after this meeting. This outlook is based on the analysis that personal consumption and corporate capital investment could increase due to the supplementary budget passed by the National Diet last month.

In its report last October, the Bank of Japan projected real GDP growth for both the 2025 fiscal year (April 2025-March 2026) and the 2026 fiscal year at 0.7%.