Financial News: Bank Of Japan Holds Key Rate; Lifts Growth

Bank Of Japan Holds Key Rate; Lifts Growth Outlook

01/23/2026 - 01:39:00 (RTTNews)

(RTTNews) - The Bank of Japan retained its key interest rate following a quarter-point hike in December, and raised its economic growth outlook citing the effects of government's stimulus package.

The policy board, headed by Ueda Kazuo, voted 8-1 to maintain the uncollateralized overnight call rate at around 0.75 percent.

The rate had previously been increased by 25 basis points in December, taking it to the highest level since 1995.

The decision came after Prime Minister Sanae Takaichi set the stage for a snap election on February 8, and pre-election fiscal giveaways hit both JGBs and the yen.

At the meeting, BoJ board member Takata Hajime advocated a rate hike of 25 basis points saying that price stability target had been more or less achieved and overseas economies is on a recovery phase. The rate hike proposal was defeated by a majority vote.

In its quarterly Outlook for Economic Activity and Prices report, the bank said, "Japan's economy is likely to continue growing moderately, with overseas economies returning to a growth path, and as a virtuous cycle from income to spending gradually intensifies."

Real GDP growth for fiscal 2025 was upgraded to 0.9 percent from 0.7 percent and the projection for the fiscal 2026 was lifted to 1.0 percent from 0.7 percent citing the effects of government's economic measures.

However, the bank lowered its fiscal 2027 outlook to 0.8 percent from 1.0 percent.

The bank said inflation is likely to decelerate below 2 percent in the first half of this year with the waning of the effects of the rise in food prices.

Inflation is estimated at 2.7 percent in the fiscal 2025, unchanged from the previous projection, while the forecast for the fiscal 2026 was raised marginally to 1.9 percent from 1.8 percent. Inflation outlook for the fiscal 2027 was retained at 2.0 percent.

Official data released today showed that headline inflation eased to 2.1 percent in December from 2.9 percent in November. Core inflation excluding fresh food weakened to 2.4 percent from 3.0 percent a month ago.

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