(Update) BOJ Skips Rate Hike amid Middle East Tensions

(The third paragraph should have read, “…Naoki Tamura…,” instead of as sent. A substitute story follows.) (Update) BOJ Skips Rate Hike amid Middle East Tensions Tokyo, April 28 (Jiji Press)–The Bank of Japan decided Tuesday 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. At a two-day meeting that ended Tuesday, the BOJ’s Policy Board 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 kept unchanged for three meetings in a row after being raised from around 0.5 pct last December. The three dissenting Policy Board members–Junko Nakagawa, Hajime Takata and Naoki Tamura–proposed raising the policy rate to around 1.0 pct, citing increasing inflation risks, but it was rejected by a majority vote. The BOJ also adopted its latest quarterly Outlook for Economic Activity and Prices report, in which the central bank boosted its growth forecast for Japan’s core consumer price index in fiscal 2026, which started this month, to 2.8 pct from 1.9 pct. 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 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 growth 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.” The central bank added that it is necessary to “pay particular attention to the impact of the future course of the situation in the Middle East on financial and foreign exchange markets and on Japan’s economic activity and prices.” Still, the BOJ noted that “underlying CPI inflation has been approaching 2 pct and real interest rates are at significantly low levels,” suggesting its intention to consider a further interest rate hike. END [Copyright The Jiji Press, Ltd.]