Financial News: Bank Of Japan Holds Key Rate Steady As

Bank Of Japan Holds Key Rate Steady As Expected

07/31/2026 - 08:27:00 (RTTNews)

(RTTNews) - The Bank of Japan maintained its key interest rate on Friday after a quarter-point hike in June but the governor signaled a possible rate hike in September and the bank assessed that the underlying inflation could overshoot the target.

The BoJ policy board voted 8-1 to retain the interest rate at 1.00 percent. The bank had raised its benchmark rate by 25 basis points in June.

Policymaker Takata Hajime was the sole dissenter who sought a 25 basis-point hike.

At the press conference, BoJ Governor Kazuo Ueda said if monetary conditions are accommodative, there is a chance that the bank could speed up the pace of interest rate hikes.

ING economist Chris Turner observed that the BoJ's formal position is that it will continue to tighten policy-probably towards a neutral rate at 2.00 percent.

"But with the government transitioning the economy toward growth and seeking supportive conditions, the BoJ may take two years to raise the policy rate to 2.00 percent," Turner added.

In the Outlook for Economic Activity and Prices, released on Friday, the Japanese central bank said there is a risk of underlying inflation deviating upward above the 2 percent target.

Inflation forecast for the fiscal year 2026 was lowered to 2.5 percent from 2.8 percent, due to the effects of the government's measures to reduce the burden of higher energy prices on households.

Meanwhile, the projection for the fiscal 2027 was lifted to 2.4 percent from 2.3 percent. For the fiscal year 2028, inflation is seen at 2.0 percent, unchanged from the April forecast.

The BoJ forecast the Japanese economy to grow 0.6 percent in the fiscal 2026, up from 0.5 percent estimated in April. Similarly, the outlook for the next fiscal was lifted to 0.8 percent from 0.7 percent.

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