BOJ Keeps Benchmark Rate Unchanged at 0.75% as Expected (Comprehensive)

Eight Out of Nine Support 'Rate Hold'
One Member Calls for 'Rate Hike'

Kazuo Ueda, Governor of the Bank of Japan (BOJ). Photo by AFP Yonhap News

The Bank of Japan (BOJ), Japan's central bank, left its benchmark interest rate unchanged at 0.75% on January 23, as widely expected by the market.

The BOJ decided to maintain its short-term policy rate at the current level during its monetary policy meeting, which was held over two days through January 23. Eight out of nine policy board members voted in favor of holding the rate, while one member proposed raising it to 1%, citing heightened upside risks to inflation and the ongoing recovery in overseas economies.

Last month, the BOJ raised its benchmark rate from "around 0.5%" to "around 0.75%." This followed the end of its negative interest rate policy in March 2024 after 17 years. The central bank then gradually increased the rate to around 0.25% in July 2024 from the previous 0-0.1%, and to around 0.5% in January last year. The current policy rate is the highest in 30 years since 1995.

Local financial market experts believe there is a strong likelihood that the BOJ will further raise the benchmark rate after June, with a possible hike as early as April. According to a Reuters survey conducted among economists from January 6 to 13, most respondents predicted a rate hike after July. Over 75% of respondents said the BOJ would raise the rate to at least 1% by the end of September, while many anticipated the central bank would take time to monitor economic conditions before implementing additional hikes.

On the same day, the BOJ also released its quarterly "Outlook for Economic Activity and Prices" report. The central bank raised its real GDP growth forecast for fiscal 2025 (April 2025-March 2026) from 0.7% to 0.9%, while maintaining its forecast for the consumer price index (excluding fresh food) at 2.7% for the same period.

The growth forecast for fiscal 2026 was revised up from 0.7% to 1.0%, while the forecast for fiscal 2027 was lowered from 1.0% to 0.8%. The consumer price inflation forecast for fiscal 2026 was raised from 1.8% to 1.9%, and the forecast for fiscal 2027 was kept at 2.0%.