BOJ Keeps Policy Intact amid Middle East Tensions

Tokyo, April 28 (Jiji Press)–The Bank of Japan on Tuesday decided to keep its monetary policy unchanged while raising its fiscal 2026 inflation forecast, in light of higher crude oil prices amid tensions in the Middle East. The BOJ’s Policy Board, at a two-day meeting that ended Tuesday, voted six to three to maintain the policy of guiding the unsecured overnight call rate, Japan’s benchmark short-term interest rate, to around 0.75 pct. The policy rate was raised from around 0.5 pct in a decision made in December last year. The three dissenting Policy Board members proposed raising the policy rate to around 1.0 pct. In its latest quarterly Outlook for Economic Activity and Prices report, adopted at the Policy Board meeting, the BOJ forecasts that Japan’s core consumer price index will rise 2.8 pct in fiscal 2026, which started this month, up from 1.9 pct projected in the previous report released in January. The growth outlook of the core CPI, which excludes often volatile fresh food prices, was revised up to 2.3 pct from 2.0 pct for fiscal 2027. The newly disclosed core CPI growth projection for fiscal 2028 stood at 2.0 pct. Also in the outlook report, the BOJ cut its growth projection for Japan’s real gross domestic product for fiscal 2026 to 0.5 pct from 1.0 pct. The GDP growth outlook was revised down to 0.7 pct from 0.8 pct for fiscal 2027. For fiscal 2028, GDP is estimated at 0.8 pct. The BOJ said in the report, “Japan’s economic growth is likely to decelerate in fiscal 2026, since the rise in crude oil prices reflecting the impact of the situation in the Middle East is expected to push down corporate profits and households’ real income.” Still, the central bank added, “Japan’s economic growth rate is likely to rise moderately from fiscal 2027 onward, since it is projected that the adverse effects of high crude oil prices will wane and that a virtuous cycle from income to spending will gradually intensify.” END [Copyright The Jiji Press, Ltd.]