BoJ keeps rates steady, ups growth and inflation forecasts

The Bank of Japan kept interest rates steady on Friday and raised its economic and inflation forecasts, signalling its readiness to continue hiking still-low borrowing costs.

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The Bank of Japan (BOJ) kept its benchmark interest rate unchanged at around 0.75 per cent on Friday.

The decision came after the central bank raised its key rate to the highest level in 30 years at its December meeting, determining that there was a greater likelihood of achieving its two per cent inflation target.

The central bank now expects the Japanese economy to grow by 0.9 per cent in the current fiscal year ending in March and by 1.0 per cent in the following year, up from the 0.7 per cent expansion projected in October. The Bank of Japan raised its growth estimate and maintained its hawkish inflation forecasts on Friday even as it kept interest rates steady, signalling its confidence a moderate recovery would justify raising still-low borrowing costs further.

In a sign of its caution over the inflationary effects of a weak yen, the central bank said the currency’s moves could prod firms to pass on rising import costs and push up underlying consumer prices - a key gauge determining its rate-hike timing.

Board member Hajime Takata also proposed raising rates for the second straight meeting, which found no other voices in support but highlighted the hawkish momentum within the central bank.

At a two-day meeting that ended on Friday, the BOJ maintained its key policy rate at 0.75% in a widely expected decision after having just hiked the rate from 0.5% in December.