The Bank of Japan kept interest rates unchanged as analysts expected, citing the need to closely monitor global economic developments and highlighting risks to a fragile domestic recovery when making its rate decision.
As widely expected, Japan's nine-member central bank decided to keep the short-term interest rate at 0.25% by a majority vote.
The bank expected inflation to move towards the 2% target in the coming years, stressing its determination to maintain high borrowing costs if the economy maintains a moderate recovery.
The Japanese central bank's statement added: The bank needs to pay attention to the future path of external economies, especially the US economy, and developments in financial markets.
He continued: There is also a need to examine how these factors will affect the outlook for Japan's economic activity and prices, as well as the risks surrounding them and the likelihood of the prospects being realized.
Lowering inflation expectations
The Bank of Japan cut its inflation forecast for fiscal 2025 to 1.9% from 2.1% announced in July, but noted that risks were tilted to the upside for this year. It left its 2026 core inflation forecast unchanged at 1.9%.
The bank also reiterated its expectation that core inflation will reach levels around 2% sometime towards the end of 2025 or later, with service prices continuing to rise moderately.
