Bank of Japan Keeps Rates Steady, Slashes Growth Forecasts

Its report signals that hit from US tariffs likely to be temporary

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TOKYO - The Bank of Japan (BOJ) kept interest rates steady and sharply cut its growth forecasts on May 1, suggesting uncertainty surrounding US tariffs and the hit to exports could keep policy in a holding pattern for some time.

But the central bank projected inflation would stay roughly on course to hit its 2 per cent target in coming years, a sign that risks from US tariffs could delay, but not derail, its rate hike plans.

As widely expected, the BOJ kept short-term interest rates steady at 0.5 per cent 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, signalling 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.