(MENAFN) The Bank of Japan opted to keep its policy rate unchanged at 0.5% on Wednesday during its inaugural meeting under Prime Minister Sanae Takaichi, who began her tenure earlier this month.

The move aligned with market predictions and comes as Japanese inflation has remained above the central bank’s 2% goal for 41 consecutive months.

In a statement, the central bank noted that the decision was reached by a 7-2 vote, with two members supporting a 25 basis point increase in rates.

The Bank of Japan emphasized its commitment to raising borrowing costs if economic performance meets expectations. However, it maintained its projections, forecasting core inflation at 2.7% for fiscal 2025 and 1.8% for fiscal 2026.

The institution indicated that Japan’s economy is expected to slow, citing weaker trade and global policies that have impacted overseas markets and domestic corporate earnings.

Nevertheless, it added that factors like supportive fiscal measures are likely to provide some economic stability.

"There are various risks to the outlook. In particular, it still remains highly uncertain how overseas economic activity and prices will react to trade and other policies in each jurisdiction," the statement noted.

Markets reacted mildly to the anticipated announcement, with the Nikkei stock index increasing 0.13%, the yen slipping 0.2% to 153.03 per US dollar, and Japanese 10-year bond yields showing little movement.

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