By LEIKA KIHARA AND MAKIKO YAMAZAKI
TOKYO—The Bank of Japan kept interest rates steady and cut its growth forecasts on Thursday, as uncertainty surrounding US tariffs clouds the outlook for the world’s fourth-largest economy.
But the central bank projected inflation would stay roughly on course to hit its 2 percent target in coming years, a sign that risks from US tariffs might delay, but not derail, its rate hike plans.
As widely expected, the BOJ kept short-term interest rates steady at 0.5 percent by a unanimous vote.
Given growing headwinds from higher US tariffs, the board slashed its economic growth and inflation forecasts in a quarterly outlook report released after the meeting.
But it said underlying inflation would accelerate after a period of stagnation as a tight job market lifts wages, signaling that the hit from US tariffs was likely to be temporary.
“Japan’s economic growth is likely to moderate as trade and other policies in each jurisdiction slow overseas growth and weigh on corporate profits,” the BOJ said in a statement.
“Thereafter, Japan’s economy will see growth accelerate as overseas economies resume a moderate growth path,” it said.
Under fresh projections, the BOJ cut its economic growth forecast for the fiscal year ending March 2026 to 0.5 percent from 1.1 percent projected three months ago. It also slashed its growth forecast to a 0.7 percent expansion for the following fiscal year from 1.0 percent in January. – Reuters
