TOKYO (dpa-AFX) - The Bank of Japan retained its key interest rate in a split vote on Tuesday and upgraded its inflation outlook citing higher global crude oil prices due to the Iran war, and the policy assessment added to expectations for an interest rate hike in the near-term.
The BoJ policy board, headed by Kazuo Ueda, voted 6-3 to hold the uncollateralized overnight call rate at around 0.75 percent at the end of a two-day meeting. Markets had widely anticipated the Japanese central bank to maintain the rates this time.
However, three members were in favor of a rate hike, citing the rising pressure to normalize policy.
The bank last raised its interest rate by 25 basis points to the current level in December 2025.
'...the Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions,' the BoJ said in a statement.
In response to the rising crude oil prices, the central bank significantly upgraded its inflation projections.
Inflation outlook for the fiscal 2026 was lifted to 2.8 percent from 1.9 percent, and the projection for the fiscal 2027 was raised to 2.3 percent from 2.0 percent. Inflation is forecast to reach 2.0 percent in the fiscal 2028 with the waning of the effects of high crude oil prices.
The projected real GDP growth rate for fiscal 2026 was lower due to the significant rise in crude oil prices. The growth outlook was downgraded to 0.5 percent from 1.0 percent.
From fiscal 2027 onward, domestic economic growth rate is expected to rise moderately to 0.7 percent, since it is projected that the adverse effects of high crude oil prices will wane and that the virtuous cycle from income to spending will gradually intensify, the bank noted. For the fiscal 2028, growth is seen at 0.8 percent.
Copyright(c) 2026 RTTNews.com. All Rights Reserved
Copyright RTT News/dpa-AFX
© 2026 AFX News
