23-Jan-2026 11:44

The Bank of Japan retained its key interest rate, as widely expected, and raised its economic growth outlook on Friday. The policy board, headed by Ueda Kazuo, voted 8-1 to hold the uncollateralized overnight call rate at around 0.75 percent. Previously, the bank had raised its rate by 25 basis points in December, taking it to the highest since 1995.

In the Outlook for Economic Activity and Prices report, the bank said, Japan's economy is likely to continue growing moderately, with overseas economies returning to a growth path, and as a virtuous cycle from income to spending gradually intensifies. Real GDP growth for fiscal 2025 was upgraded to 0.9 percent from 0.7 percent and the projection for the fiscal 2026 was lifted to 1.0 percent from 0.7 percent citing the effects of government's economic measures. However, the bank lowered its fiscal 2027 growth outlook to 0.8 percent from 1.0 percent.

The bank said inflation is likely to decelerate below 2 percent in the first half of this year with the waning of the effects of the rise in food prices. Inflation is estimated at 2.7 percent in the fiscal 2025, unchanged from the previous projection, while the forecast for the fiscal 2026 was raised marginally to 1.9 percent from 1.8 percent. Inflation outlook for the fiscal 2027 was retained at 2.0 percent.

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