The Bank of Japan (BOJ) opted to keep its policy rate unchanged following its monetary policy meeting, maintaining the benchmark rate at 0 per cent-0.1 per cent. This decision aligns with the expectations of economists surveyed by Reuters.
While the move was anticipated, it comes after Tokyo reported lower-than-expected inflation in April, with the core inflation rate at 1.6 per cent compared to Reuters' projection of 2.2 per cent.
Additionally, the BOJ stated its intention to continue bond purchases in accordance with its March decision. In March, the bank disclosed that it had been purchasing approximately six trillion yen (USD 83.5 billion) worth of bonds monthly.
No remarks were made by the BOJ regarding the yen's performance, which has steadily weakened since the BOJ terminated its negative interest rate policy last month and discontinued its yield curve control policy.
Following the decision, the currency surpassed the 156 mark against the U.S. dollar, recently trading at 156.11.
In a separate announcement, the central bank released its second-quarter outlook for Japan's economy, revising its inflation forecast for fiscal 2024.
The BOJ now anticipates inflation to range between 2.5% and 3% for fiscal 2024, an increase from its January forecast of 2.2 per cent to 2.5 per cent. Subsequently, inflation is projected to moderate to "around 2 per cent" in fiscal 2025 and 2026, according to the bank.
Furthermore, the BOJ lowered its gross domestic product (GDP) growth projections for fiscal 2024 to a range of 0.7 per cent to 1 per cent, down from January's estimate of 1 per cent -1.2 per cent growth.
Regarding its future monetary policy, the BOJ stated that it would depend on economic and price developments, with accommodative financial conditions to be maintained "for the time being."
While acknowledging the high level of uncertainties domestically and internationally, the central bank expressed readiness to "adjust the degree of monetary accommodation" if its forecasts materialize and underlying inflation rises.
