Bank of Japan Keeps Interest Rate Unchanged at 0.75 Percent

(MENAFN) The Bank of Japan left its benchmark interest rate unchanged at 0.75% on Tuesday, a move widely anticipated by markets, as policymakers flagged mounting economic headwinds tied to surging crude oil prices and Middle East instability.

In an official statement, the central bank cautioned that Japan's economic expansion is set to lose momentum through fiscal 2026, with elevated energy costs expected to squeeze corporate margins and erode households' real purchasing power.

Despite the cautionary outlook, the bank struck a measured tone, noting resilience in key economic pillars: "However, the economy is expected to continue growing moderately, albeit at a decelerated rate, since it is likely to be underpinned by factors such as the government's various measures and accommodative financial conditions, in addition to developments such as continued high levels of profits in the corporate sector."

Reflecting the pressure of rising energy costs, the Bank of Japan revised its inflation projection upward, now forecasting a 2.5–3% range for fiscal 2026 — a significant shift from earlier estimates.

The current rate marks a deliberate tightening trajectory. Having held at 0.5% throughout 2025, the bank moved to raise borrowing costs by 25 basis points in December 2025, bringing the rate to its present level. Since that adjustment, policymakers have opted to hold steady across the last three consecutive meetings, signaling a cautious, wait-and-see approach as global economic uncertainties persist.

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