Economic Buzz: Bank of Japan keeps interest rates unchanged, hikes next year's inflation projection

Bank of Japan (BOJ), unanimously voted to keep interest rates at 0.5%. The BOJ had raised short-term policy rates to the current 0.5% in January this year after exiting a 10-year-long monetary stimulus program last year. The rates have been held steady thereafter. The BOJ?s quarterly outlook report also disclosed high (mostly tariff-related) uncertainty regarding the impacts of trade policy changes on prices and overseas economies. The central bank?s observation was less pessimistic than its May report, which suggested the level of trade policy-related uncertainty was ?extremely high.? However, it predicted that inflation would drop to 1.8% in 2026 and slightly jump to 2% in 2027. These predictions were higher than May?s forecast of 1.7% inflation in 2026 and 1.9% in 2027.

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