Bank of Japan Holds at 0.75% While Watching Oil-Driven Inflation Trends

TradingKey - The Bank of Japan kept its benchmark short-term policy rate unchanged at 0.75% after concluding a two-day policy meeting on March 19, a decision passed by an 8–1 vote.

Source: TradingEconomics

In its latest policy statement, the BOJ reaffirmed that Japan’s economy is “recovering moderately.” While some sectors remain sluggish, exports and industrial production have been broadly steady, and corporate profits remain at relatively high levels. The manufacturing sector, however, continues to face downward pressure from tariff-related factors.

The central bank said it expects the virtuous cycle between income and spending to strengthen gradually, supported by overseas economies returning to growth, government economic measures, and continued accommodative financial conditions. The BOJ projected that Japan’s economy is likely to continue expanding moderately.

On prices, the bank noted that inflation expectations have risen modestly, with medium- to long-term expectations expected to climb further amid labor shortages and gradual wage increases. The statement also pointed out that real interest rates remain significantly low. If the projections for economic activity and prices outlined in the January Outlook Report materialize, the BOJ said it will continue to raise policy rates at appropriate times as the economy and inflation improve.

Meanwhile, the central bank emphasized that it remains highly alert to external risks. The statement specifically highlighted that amid rising tensions in the Middle East, volatility in global financial and capital markets has increased. Should energy prices stay elevated, they could feed through higher import costs and corporate prices, pushing up Japan’s inflation and altering the current assessment of the price outlook.