Bank of Japan keeps policy rate steady while raising inflation forecast on Iran war worries
The Bank of Japan maintained its policy rate at 0.75% while raising its inflation forecast due to concerns over the Iran war. The decision was made in a split vote, with some members advocating for a rate increase to address rising price risks. Additionally, the central bank cut its growth forecast for fiscal year 2026 and warned of potential economic deceleration due to increased crude oil prices.
- ▪The Bank of Japan kept its policy rate steady at 0.75% in a split 6-3 vote.
- ▪Inflation estimates were raised to 2.8% from 1.9% due to supply-side risks from the Iran war.
- ▪The BOJ cut its growth forecast for fiscal year 2026 to 0.5% from 1%.
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Japan's central bank kept its policy rate steady at 0.75% on Tuesday, while revising its inflation estimates upwards as the Iran war raises supply-side risks. The decision to keep rates steady came in a split 6-3 vote, and was in line with Reuters-polled analysts' estimates. The dissenting members proposed to raise the policy rate to 1%, arguing that tensions in the Middle East had skewed price risks to the upside. The Bank of Japan also cut its growth forecast for the fiscal year 2026 to 0.5% from 1%, and sharply raised its core inflation outlook to 2.8% from 1.9%. The BOJ has set its headline inflation target at 2%.
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