The Bank of Japan (BOJ) announced that it would keep its short-term interest rates steady at 0.5 percent, a decision made unanimously by its board members. This announcement comes amid growing concerns about the impact of rising U.S. tariffs on Japan’s economy, prompting the central bank to cut its growth forecasts for the fiscal years 2025 and 2026.

In its quarterly outlook report, the BOJ revised its economic growth forecast for the fiscal year ending March 2026 down to 0.5 percent, a significant reduction from the previous estimate of 1.1 percent. For the following fiscal year, the growth forecast was also slashed to 0.7 percent from an earlier projection of 1.0 percent. The central bank cited increasing headwinds from higher U.S. tariffs as a primary reason for these downward revisions, indicating that these tariffs could dampen exports and corporate profits in Japan.

Despite the grim growth outlook, the BOJ maintained its inflation forecasts, projecting that underlying inflation would remain on track to reach the central bank’s target of 2 percent in the coming years. The BOJ expects core consumer inflation to hit 2.2 percent in fiscal 2025 and 1.7 percent in fiscal 2026, before accelerating to 1.9 percent in fiscal 2027. This suggests that while growth may slow, inflationary pressures are expected to persist.

Source: Economymiddleeast