Bank of Japan to maintain interest rates unchanged at 0.25 percent

(MENAFN) The Bank of Japan (BoJ) announced on Friday that it will maintain its policy interest rate at 0.25 percent. In its official statement, the bank acknowledged that while the Japanese economy has experienced moderate recovery, several weaknesses still linger that warrant attention.

The BoJ highlighted that exports and industrial production remain flat, reflecting ongoing challenges in these sectors. However, there are positive developments in employment and income, which have contributed to a moderate upward trend in private consumption. Despite these improvements, the bank noted that housing investment has been relatively weak, indicating a mixed outlook for certain areas of the economy. Public investment has also remained largely stable, contributing to a generally accommodative financial environment.

In terms of inflation, the consumer price index has been rising at an annual rate between 2.5 percent and 3.0 percent. This increase is primarily driven by rising service prices, which are influenced by factors such as wage growth. However, the effects of earlier surges in import prices on consumer prices are beginning to fade. Additionally, inflation expectations have shown a modest uptick, signaling a shift in consumer sentiment regarding future price increases.

The BoJ has been cautious in its approach, having kept interest rates at minus 0.1 percent since 2015. In a significant policy shift, the bank raised the rate to 0.1 percent during its March meeting and subsequently increased it to 0.25 percent in July, marking the highest level since late 2008. This gradual tightening reflects the bank's efforts to navigate the complexities of the economic landscape while supporting sustainable growth.

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